All Forum Posts by: Tim Johnson

Real Estate is THE BEST way to decrease/eliminate your tax burden.

Here's why:

This is a picture of a Schedule E.

It outlines profit and losses from rental real estate.

Look at all of the losses you can count against your rental income.

Now look at line 18.

Line 18 is usually:

(Value of your property) - (Land value) / 27.5 years.

For example:

($650k) property value - ($150k) Land value = $500k / 27.5 years.

That's $18k in losses you can deduct against your rental income.

Now add that with lines 5-17 and you will most likely show a loss on paper.

***EVEN IF YOU CASHFLOW IN REAL LIFE***

Ready for the boatload of cherries on top?

- Run a cost segregation study on this property in 2024 and you might have $100k on line 18...

Without diving too deep on this post - If you run this scenario as a real estate professional while materially participating in the property, You'll be able to reduce your's and your spouses taxable income that year... 

P.S. - When you go to qualify for your next proeprty, your lender can actually add losses from line 18 back into your income... allowing you to qualify for the next property. (Have your Cake and eat it too!)

@Tanner Sortillo

Some great advice in here!

I work with investors here in the valley, and always take a big picture view at what they have going on outside of RE investments as well. 

We typically start by setting up a strategy that will maximize the tax benefits available to them so that they can continue investing/growing after the first initial purchase. 

I typically talk less about the market conditions until we have a general plan in place, and then we discover what may work best with the current climate (rates, fear, opportunity, demand, etc..)

@James Clays  It depends on what you are trying to accomplish. 

Here in AZ, you can generally piece together those subcontractors at pretty cheap rates, so unless you need an acutal GC for permits being pulled, etc... You could find those contacts pretty easily. 

I highly recommend with ANY GC... call multiple reference AND double check the license/ROC number they give you. 

We had a GC give us a fake ROC number and walk off with about $50,000 after a few projects of working together before we fired him. 

It was a tough lesson to learn but it'll never happen again!

Your local though - Message me and let's meet up sometime. 

@Jarrod Ochsenbein Incredible work! 

I grew up in Oregon and now live here in AZ. 

Are you utilizing any cost segregation studies/real estate professional status to lower the taxable income?