I totally get why you should reinvest profits from rental units. But what do you do with those profits? Say I am cash flowing $30K/year. What should I do with that? Save up for a down payment on another unit(s)? Pay off principal? Something fancier?
buy more units to increase cash flow, do needed repairs and save for a rainy day
Dude, 30K a year will be an AWESOME cash flow. I will continue leveraging myself to a point where I feel most comfortable. If I continue to cash flow from those new acquisitions then I will start placing them into tax shelters like Roth IRAs, 529 plans (If you have children) and municipal bonds. Or be doing 1031 exchanges and go from 4-5 unit properties to 10-15 units, then 15-20 units, then 20-30 units, then 30-40 and so on until I reach 100 or more units. There is a variety of ways to invest your money, real estate by far to me is the safest bet and Oh the tax write offs should be more than a good motivation by itself.
What strategy did you go with?
I am looking at ways to reinvest at the moment and would like to minimize tax hit before years end
Whatever you do make sure you put aside the tax liability and not reinvest it all.
The only way to reduce your "tax hit" is to either make less money or somehow generate deductions. Since this is a real estate investment forum, buying property isn't a deductible event by itself. So you need to actually spend it or find some non-cash deductions. Good luck.
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