Go From Employee To Entrepreneur In 12 Easy Steps

By Than Merrill

Investing in real estate has become synonymous with a lot of attractive benefits. For starters, it may coincide with a lucrative career. There are not many industries that offer the wealth building potential real estate investing has to offer. However, not everyone is in it for the money. There is an entire population looking to take advantage of the freedom real estate investing provides. It is entirely possible to make your own schedule, and even work for yourself – on your own terms. It is essentially a path to becoming your own boss. What more could you want?

Those looking to make the transition from employee to entrepreneur are typically of the belief that there are two steps: quitting and starting a company. I can assure you, however, that it is a bit more complex than that. While anyone can do it, you must mind due diligence. Neglecting to take the appropriate path is ill advised. There are a number of things you must take into account, each of which could influence your bottom line for the duration of your career. Take it from me; know what you are doing before you consider becoming an entrepreneur.

If you are looking to fire your boss and become an entrepreneur, look no further. Below are the 12 steps you should focus on if you are to become self-employed: 

Good Investors Know How To Put Plans Into Action

By Paul Esajian

Planning is, without question, the backbone of real estate success. Whether it is a business plan or a subsequent marketing strategy, investors should never rush in without knowing what they are doing. 

There is, however, something that is as equally as important as planning, if not complimentary: taking action. Your plans must lead to taking action. Declaring that you are going to do something isn’t enough. Far too many investors have great ideas that never come to fruition. It is those that are willing to take the next step that separate themselves from the pack. Whether you are paralyzed by fear or aren’t exactly sure where to start, there are things you can do to get the ball rolling. Here are four easy steps that will put your plans into action, and help your business grow:

1. Start immediately: People have a tendency to wait for “the best time” to get started on new projects. We have all heard of the person who waits to start their diet on a Monday, or to make a big life change after the New Year. Truth be told, there is never a perfect time to take action. By waiting until everything lines up perfectly in your business, all you are doing is procrastinating. The best way to take action is to start as soon as your plan is mapped out. Typically, the quicker you act,  the more likely you will take sustainable action. The longer you wait, the more holes you start to find – either with your plan or the idea itself. Just like there is never a perfect time to act, there is no such thing as a perfect plan. Every person you talk to will tell you why you can’t do something, or should at least do things a different way. As long as you are comfortable with your plan and have researched it properly, get started right away. The quicker you start, the more likely you will be successful.

2. Create a roadmap: Along your with your commitment to get started, you need to create a plan of attack. Start by asking yourself as many questions as possible. Who do you need to have on your team? What is your ultimate goal? When are you going to act? What do you need to be successful?

There are always going to be roadblocks. Knowing any potential issues before you start will help if you encounter them down the road. Write down everyone you need to assemble on your team, what their roles will be, and how much you plan on spending. It is important that leave no stone overturned before you get going. You want to put your head down and go as soon as you get started.

3. Set a firm schedule: After you have an idea of what you want to do and who you need to do it, you are ready to put the wheels in motion. You need to set firm dates and timelines for every action you want to take. This will help whether you are trying to get your first deal or setting up a new direct mail campaign. By knowing that you need to email 100 new people on Tuesday, you can adjust the rest of your schedule accordingly. Set the times and days that you want to devote to a plan and go from there.

4. Regroup: You need to assess where you are on a daily basis. Before you go to bed at night, think about what you did that day to accomplish your goals. If you followed your schedule, you should be happy with your progress. As great as this is, there is always tomorrow. Take a look at what you did well and which areas you may need to improve on. In taking stock of where you are and what you need to do, you give yourself the best chance at realizing success. Write down everything that you need to get done at night so that when you wake up you can hit the ground running. Every day in the real estate world is a new battle that can present problems. There will be days when things don’t go your way, but tomorrow is always a new day.

The biggest difference between successful investors and those that struggle are the actions they take. Successful investors are willing to put themselves out there and do the things that others either don’t want to or can’t do. Turning plans into actions doesn’t take any special education or knowledge of the market, but it is necessary nonetheless. This is something anyone can do, as long as they have a plan and are willing to follow through with it.

Flipping Houses: How to Handle Luxury Properties

By JD Esajian

Someone must have forgotten to tell America’s wealthy that we’re in the middle of a housing crisis,because in this bear market, luxury properties are selling well.To the upper class, buying a house is like picking up a new set of golf clubs, and that’s good news for house flippers. Although we typically recommend sticking to affordable properties when flipping houses, it might be time to upgrade the merchandise if you’re struggling to pay the bills.  But before you go and spend your life savings on that abandoned mansion, there are a few things about flipping luxury properties you need to know.

1)    A Wal-Mart faucet has no place in a designer sink. If you plan on flipping luxury properties, be prepared to pull out all the stops. That means investing in high-end appliances, top-shelf paint, boutique lights and the best of everything else. To keep the interior of the home consistent, you might have to add six figures to your renovation budget. It’s going to hurt to spend all that money, but on the bright side, you’ll recoup the costs at closing.

2)    To furnish or not to furnish. Don’t be surprised if the previous owners left a set of furniture behind when they moved. Rich people do that sometimes. However, don’t use those leftover dining tables and couches in the home unless you’re willing to fully furnish it. Luxury buyers expect their new houses to be fully furnished or completely empty. If you don’t have the budget to furnish the entire real estate investment, just strip it out and sell what you can at auction.

3)    Forget about fixer-uppers. When you’re buying a house for the “one percenters,” you should avoid any properties marked “as is.” Water damage or structural issues aren’t going to fly with the rich, and the repair bills will be so large that you’ll eat up your entire budget just trying to pass inspection. When you find a very expensive home in that sort of condition – even if it’s in a great location – just walk away.

Flipping houses for the rich and famous isn’t easy. Something about putting top-end appliances into a home you’ll never be able to afford for yourself just eats at the soul. But this year, if you’re in a position to give it a shot, flipping these homes can be a worthwhile pursuit. If you can find a way to handle the high overhead and the increased workload, you’ll be able to turn out property after luxury property for a very healthy income this year.

Real Estate Content Marketing Trends For 2016

By JD Esajian

How can real estate professionals win the important content marketing battle coming up in 2016?

Inman News recently revealed how one real estate broker is experiencing an exponential increase in business without giving into the advertising giants of the industry. At the same time, this business has acknowledged that they receive about 10,000 visitors a month, all thanks to their own content marketing strategy.

It should go without saying, but content marketing definitely works for generating real estate leads, and could make all the difference in net earnings in 2016. However, there is no question that what works is changing. So what has been working for hot brands? What are experts warning against now? What trends should real estate marketers be prepared for over the coming months?

Hold That Holiday Mail!

Inc. Magazine has sided against holiday emails this year. Whatever their reason, data from AWeber shows that December 25th and January 1st are two of the busiest days of the year for email blasts. Ironically, these days also have the lowest open rates, at just 30% to 40%. HubSpot suggests the greatest engagement rates will be achieved around January fourth or fifth, when workers get back in front of their screens after the holidays. So think before you send out your next email. There is a chance it won’t get read until earlier next year.

What Worked & Changed in 2015

According to Inc., the three main game changers for content marketing in 2015 were:

1. Improving timing of publishing and sending messages (as seen above)
2. Getting more personal with content
3. Better blending social and content together

Inc. also notes that content creation and publishing hit a new high in 2015, as more marketers pushed to increase volume. Fortunately, data shows that investing just an additional six hours a week can produce more traffic, and that doesn’t mean you personally have to be the one doing it.

Content Marketing Tactics & Strategies for 2016 and Beyond

7 evolving trends, and what to do about them:

1. Tailored Content: As the competition gets better at tailoring content to individuals, real estate marketers need to keep up. Specifically, this may mean building more smaller and better targeted lists, versus lumping all contacts together.

2. Going Offline: Inc. predicts that one of the most notable trends ahead will be content that leads consumers offline to real experiences. This is a major trend already seen going both ways, including major retailers such as Apple and Amazon. Those real estate pros and brands that get ahead of this curve in providing more real human interaction will have a great lead in today’s market.

3. More Data Becomes Available: More data and tools for extracting data are becoming available to real estate marketers. More insight helps to hone in on more of what is really going to produce the desired results. For example; a new report from Real Legal Marketing reveals that while long form content has emerged as the leader for gaining backlinks to blogs, (which can boost Google placement), there is no relation between content that attracts a lot of links and content that is more likely to be shared. In fact, the opposite could be true. The verdict is that real estate marketers are going to need both long pieces of content and short ones if they want to both increase Google rankings, and actually drive in more real customers.

4. What Gets Measured Gets Improved: Entrepreneur Magazine is calling for marketers and business owners to get better at tracking their results. All the tools in the world are no good, unless they are used. Use analytics to decipher what is really creating the best results, and not.

5. Content Gets More Expensive: There are lots of people trying to hire marketing help for virtually nothing. That isn’t working. A few years ago, it may have been possible to pick up great content creators for $5 or $15 an hour. Now the best have become a hot commodity. By all means, shop around for good deals. However, some will need to realize they have to start with less, but higher quality content if they want to earn enough to stick around to produce more and keep growing. Focus on quality over quantity. Focus on good, unique content, and lock up good help at affordable rates while you can.

6. Marketing Goes Tribal: As bestselling marketing author Seth Godin has been predicting for a while, we are going to see consumers become more tribal. Meaning that they’ll trend to the brands they have the best connection with, and brands will win by better serving smaller groups better, than trying to blast watered down marketing to the general masses. As we see more marketing noise in 2016, big real estate giants advertising on TV, new well-funded apps coming online, and big players consolidating smaller ones, it is essential that real estate pros focus on building loyalty and stronger connections with their best customers.

7. New Networks: With so many attempts being made at creating new social networks, 2016 could certainly be the year we see another really take off. This doesn’t mean a platform that will replace Facebook or LinkedIn, but another channel that helps connect individuals and brands. Choose to be an early adopter this time! Don’t wait for the competition to test it and master it first. Dominate, leverage it, and connect what you do there with your other content.

Chinese invest billions in Dallas-area real estate

By: Steve Brown

Developers who are redoing downtown Dallas’ landmark Statler Hotel have spent time in China courting investors.

“I’ve already made three trips to China,” said Frank Zaccanelli, a partner with Centurion American Development Group. “They are very interested in what’s going on in Dallas.”

Centurion American, which also has suburban home and commercial projects in the works in North Texas, isn’t the only local real estate firm with an appetite for Chinese investment.

Chinese money has funded recent downtown Dallas tower sales.

And capital from China is finding its way into everything from local apartments to single-family homes.

Last year Chinese investors pumped more than $3 billion into U.S. commercial real estate investment, according to data from the commercial property firm JLL.

And they bought more than $28 billion in American residential properties — more than twice what any other foreign buyer acquired, according to the National Association of Realtors.

Asian investors accounted for almost a third of Texas home sales to foreign buyers, behind only Latin Americans, who accounted for more than 40 percent, the Realtors said.

Chinese buyers are hot for Dallas-area apartments, too.

“We’ve closed $550 million in transactions in the last 90 days,” said Chris Colombe, managing director with the apartment broker ARA. “Probably a third of those deals had equity coming from China.”

Chinese investors are the top foreign buyers and funders of U.S. hotel acquisitions this year. And they are one of the top offshore players in the office market, according to data from the Urban Land Institute.

Traditionally, Asian buyers have liked West Coast markets, but with prices for property there skyrocketing and fewer chances to buy, Chinese and other foreign buyers are scouting Dallas for deals.

“There are fewer opportunities in the gateway markets they are familiar with,” said Walter Bialas, market research director with JLL. “There is a North Texas story that is real compelling today, and it’s put us on their radar.”

Indeed, most Chinese investors probably haven’t heard of Plano. But they know Toyota.

And downtown Dallas’ skyscrapers are bargain-basement-priced compared with towers in California or New York.

Bialas said the increase in Chinese property purchases in the U.S. is due to a growing need for capital preservation and the opportunity to participate in one of the best real estate markets this country has seen in generations.

“They want to make money,” he said. “And their property hold periods are longer than a lot of the quick flippers we see.”

Foreign investment in Dallas real estate comes in waves and different flavors.

When I started writing about the local property market in 1980, the big story was Canadian buyers and developers.

Soon the emphasis shifted to Japanese investors.

Germans and other Europeans were next to make headlines here.

But for the coming year or two, don’t be surprised if Chinese money winds up in North Texas property purchases.

Improve Your Business On A Daily Basis

By Than Merrill

Very little separates one good investor from another. While a solid education and access to financing can contribute to success, the manner in which they work is most often the deciding factor. 

Real estate investing, for all intents and purposes, is relatively easy, but far from simple. Accordingly, if you have a proven system that works, it is easy to replicate it for results. However, getting this system perfected requires a significant commitment. Time and effort will reward you accordingly. Sounds easy enough, but not many investors are willing to put in the hard work.

The most successful people in business set goals every day, specifically with the intent of meeting them. This gives them more structure to accomplish everything in the course of an 8 to 12 hour work day. Subsequently, you don’t need to work for 10 hours every day, six days a week, to be successful. Focus your attention on improving your business every day and your accomplishments will add up.

A distinct lack of progress can be particularly frustrating when you are not closing deals. It is at this time, more than ever, that you need to dig in and get to work. Set small goals that can be easily accomplished and go from there. This could be as easy as calling ten realtors on an introductory call. From there, you can set the bar from ten calls to one lunch meeting. After a while, your small successes motivate you to do more and soon enough your thoughts become action. Even if you are only investing part time, there are plenty of tasks you can knock off in just two hours a day that will greatly enhance your business.

Some of the best ideas are thought of by people who will never do anything about them. Instead of filling yourself with regret, allocate just a small block out of your day to taking action. Mailing letters, sending emails, making phone calls, meeting fellow investors and developing systems to improve your productivity are certainly not glamorous parts of the business, but they are critical to your success. The more up to speed you are on your behind the scenes work, the more ready you will be when deals do come along.

Between surfing the internet, reading a magazine or playing on your phone, you can almost certainly find the time to work. Again, you will find that it doesn’t take much, but it does take consistency. If you do just a little, but do it often, you will be pleased with the results. Binge working does not really work. You need to contribute to your business a little bit all of the time.

Most investors do not last one year in the business. They get frustrated that success is not happening fast enough and eventually give up on the business. You can avoid this by working on your business every day. If you do, you will start to see the success and your business will soon take off.

Composure: The Key To Investor Success

By Than Merrill 

Being a real estate investor is not all that it is cracked up to be. Investors on TV shows and late night infomercials may be glorified for viewer pleasure. 

For every five successful deals you have, you will inevitably encounter a series of rough patches. Much of the real estate investing business is a numbers game. If you market to a greater number of people, in theory, you should gain more leads. The more leads you get, the higher conversion rate you have. That means some of these deals will fall by the wayside at some point. This may happen after the initial conversation or at the closing table. However, what you do and how you react when this happens will often dictate what kind of an investor you are. More importantly, keeping your composure will ultimately lead to more success.

Other than losing money on a deal, having a deal fall apart right before closing is the most demoralizing aspect of real estate. You can spend months getting everything lined up, only to find out that someone dropped the ball or someone had a change of heart at the 11th hour. It can be easy to point fingers and play the blame game, but it is at these times when you need to put your best foot forward. Losing one deal is no fun, but it is part of the business. If you berate the attorney or one of the realtors, you may lose future business. Keep your composure and maintain healthy relationships.

This doesn’t mean you can’t fight to save your deal, but at some point you need to know when to back off. If you are in the business long enough, you will realize that deals have a way of coming back around. If you are slow or you needed the closing to move forward with other properties, this can be especially painful. However, if you maintain composure, people will take your appreciation into consideration. You may actually start a relationship that could be far more valuable.

After losing a deal, most investors will throw it in the trash and never look back. However, it is critical to find out exactly why the deal blew up and what can be done to reconcile it. Sometimes it is best to revisit the situation after everyone has had time to think about it. If you are working with distressed property sellers, you have to put yourself in their position. They are selling because they have to instead of wanting to. This is a trying time in their lives and they want to cover all of their bases and take their time. Sometimes they just need reassurance or want to explore one more option before they move forward with you. If you blow up after they have a change of heart, you will lose them forever. If you give them some time, it might be all that they needed.

Losing deals happens to the most seasoned investors. This is why it is important to have a constant flow of deals coming in to always keep your business moving forward. It is easy to be an investor when things are going great, but when things get rough, everyone involved in the deal will be looking at you to see how you react. If you keep your cool, you may actually turn a negative into a real positive.

7 Real Estate Networking Mistakes

Posted by JD Esajian

Real estate agents, investors all those in other related fields are frequently hammered with the message that they need to be networking. It is true that it could be the most important and valuable use of time in pushing through to growth and success but for all the advice that these professionals must be networking there is little, if any on actually how to do it, or perhaps more critical how not to do it. 

So whether you are a mortgage broker, real estate investor, agent, title company rep or insurance salesperson what are some of the big mistakes that you’ll want to steer clear of?

1. Not Getting Started

Despite its hand in hand connection with success and doing more real estate transactions so many real estate agents and other professional are increasingly keeping themselves locked away behind their screens today instead of getting out and shaking some hands. Ducking the flu virus might be a nifty excuse but that won’t put money in your pocket. If you really can’t bear to pull yourself the sofa, try hosting a Google hangout instead.

2. Networking for Individual Sales

Networking events and local real estate investing meetups can be great places to find real live deals, but it I going to be a hard slog and a measly hourly wage if you have to spend hours on end to network for each individual deal or lead. Instead try setting the sights on networking with strategic referral partners that can bring you a dozen or more leads each per month.

3. Networking without a Clear Goal

If you are just a social butterfly that enjoys chatting to strangers you’ll find networking lots of fun, but don’t go unprepared and without a clear goal for each event.

4. Shameless Self-Promotion

Remember, that at professional networking events everyone else is there for what it can do for them, not you.

5. Being Dull

Whatever you do, don’t be dull. It won’t get you remembered and it won’t be much fun either, so enjoy yourself. Loosen up and find one thing to be really passionate about if you want to the real estate agent or investor that gets remembered in the morning.

6. Overspending on Networking

This is a huge trap that gets newbies all the time. Networking is crucial but don’t go broke doing it. The bill can get big fast between drinks, entry, gas and giveaways. Watch your ROI.

7. Failing to Create Action

Don’t fail to seize on the chance to take decisive action. That doesn’t mean you have to hard close on everyone, but take them in the right direction. Get social followers and set appointments.

5 Qualities of Highly Successful Real Estate Investors

Posted by JD Esajian

Real estate investing is picking up steam and many new investors are jumping into the market along with those that are finally returning to the market after a few years off. However, there is a big difference between those who waddle along doing a few deals here and there and those who really achieve incredible success and make the big money.

So what is it that really separates those who enjoy amazing incomes and lifestyles from real estate investing and those who struggle?

Here are 5 traits that are consistently seen among highly successful real estate investors…

1. Innovation

Just as innovation has made the difference in Apple, Google and Facebook rising to the top it is those real estate investors who are the most innovative that shine and enjoy the largest share of the limelight. Fortunately, innovation can be developed and incubated and is not only something a select few are born with.

2. Strong Decision Making

Real estate investors are faced with dozens of important decisions every week so obviously those who are good at making them usually come out as winners. This doesn’t mean having a magical gift for always making the right decisions; it is often a matter of simply being fast and knowing when to delay making rash decisions.

3. Aggressive Goal Setting

How are you going to achieve amazing things through real estate investing unless you have a roadmap to get you there? The ultra-achievers know this and are known for their goal setting habits, setting big goals and developing action plans for achieving them.

4. Incredible Time Managers

We all have the same amount of hours in the day so it is those who use them the best who make the biggest profits in real estate investing and have the time to enjoy them. Learn to delegate, use systems and work smarter.

5. Have Coaches

Just like top athletes and other business leaders highly successful real estate investing pros also seek out coaches and mentors to help them get the edge and time advantages over their competitors.

What Records Should I Keep for Tax Purposes?

By Erin Eberlin

There are many tax deductions available for landlords and property investors, but also very specific ways you must file your taxes. Because of the complex nature of real estate investor taxes, you should keep thorough and detailed records of all important documents, income and expenses throughout the year. Knowing what records to keep for tax purposes can turn filing your taxes from a nightmare and potentially costly experience, into a relatively stress-free one.

Keeping detailed records is beneficial for many reasons:

1. It will make it much easier to file your taxes.
2. Having everything recorded will help keep you from missing out on any deductions, thereby saving you money. 
3. It will help you make sure you are filing accurate claims. Instead of guessing, “I think I paid that contractor $1,000,” by quickly pulling up a spreadsheet, you will know you paid him $850 on July 17.
4.  In case you are audited or the IRS has any questions about items on your tax return, you will have the proof to back up your claim. If you do not have this documentation, you will find yourself spending time and money trying to find the proof. Worse, if you are not able to come up with a receipt, your claim will not be honored and you may even have to pay additional taxes and penalties.

What Records Should I Keep Track Of?

The short answer is you should keep track of everything! The IRS is notorious for auditing small businesses, especially those that show a loss in consecutive years. Additionally, many IRS agents do not understand the tax nuances that apply to real estate investors, making them more likely to question your filing.

You will need to have proof if the IRS questions any of your items or even in the everyday course of business if someone tries to question a payment. You will need to keep permanent records and short-term records.

1. Permanent Records

These are documents that you will want to keep indefinitely.

What are some examples of permanent records?

These are documents that will be relevant and valuable to you well beyond the current tax year, such as:

•  All tenant leases.
• Any sort of legal documents- fines, inspection reports, court appearances.
•  Any type of permit you have taken out on the property.
• Anything you would depreciate- such as property or improvements.
•   If you have your company incorporated as an LLC, LP, S Corporation or other, you will want to keep all records pertaining to this.
• Insurance policies.
• Loan documents- such as mortgages.
• Past years’ taxes.
• Property title/deed.

Short Term Records

By short term, I am not referring to a couple of months. You will want to keep any documents you deem important enough to claim on your taxes for a minimum of five years. How long after that depends on your comfort level. This will help you in case you are ever audited or sued.

What are some examples of short term records?

Anything that counts as income or an expense for the given tax year, such as:

• Advertising costs for your business or property.
• Entertainment expenses- such as dinners or lunches for current or potential customers.
•  Interest paid on mortgage and any credit cards for business use.
•  Legal/professional fees- for accountants, lawyers, insurance agents, Realtors.
•  Office expenses- internet, second phone line for business, office supplies, home office deduction if you have a home office used solely for business.
• Rent received.
• Repairs performed.
• Security deposits received.- When a tenant's lease ends, if you keep part of the security deposit, you must record it as income. If you keep some of it to pay for repairs, the money you spend on the repair is considered an expense, which you can deduct on your taxes.
• Travel expenses for business- such as miles driven for rental activities.
• Utilities paid.
• Wages paid to employees or independent contractors.

How Should I Keep Track of My Records?

You should keep a digital copy (computer) and a hard copy (paper) of all of your records.

1. Digital Copy

You will want to use a spreadsheet or a program such as Quicken Rental Property Manager to keep track of your income and expenses. You should do this as soon as the income comes in or the expense occurs. You will want to include as much detailed information as possible: the date, time, who it was paid to or who paid you, nature of the income or expense, and the amount. You can even include how it was paid or incurred (cash, check number, credit card, money order, etc.).

The level of detail will depend on the software you use or create. Some programs will link directly to your bank accounts and will record your income and expenses for you. Even if you choose a less expensive program, or keep your records on personal spreadsheets, you should still set up separate records for each property, for each type of expense, and for separate types of income. The point is to record as much information as you can at the time of the transaction, so that you can easily create financial reports in the future.

You should always back them up on cd, on an external hard drive and even with a paper copy. They should be printed out at the end of every month and/or the end of the year.

2. Hard Copy

You will want to make sure you have a paper copy of your most important documents. If possible, you will want to store them in some sort of fire retardant filing system or safe deposit box. If you are unable to find one large enough for all your files, you will want to keep the most important ones, such as the titles to the property in this box. Categorize everything by year and then alphabetically sort the files so they are easy to find.

Common Tax Deductions for Landlords

By Erin Eberlin

The federal government allows landlords and rental property owners to deduct certain expenses on their taxes which can offset their taxable income. Being able to take advantage of so many tax deductions is often what makes owning rental property a lucrative venture. The following are the most common tax deductions for landlords.

You may only deduct these expenses if they are considered ordinary and necessary in the line of business:

• An expense is considered ordinary if it is “common and accepted” within your industry. For example, an ordinary expense for a landlord could be paying a contractor to fix a roof leak.

• An expenses is considered necessary if it is “helpful and appropriate” to your business. For example, a necessary expense for a landlord could be buying Quicken Rental Property Manager, to more seamlessly keep track of all the numerous records a landlord must document.

What Are Business Tax Deductions?

Two Points of Caution

1. You must keep detailed and accurate records if you are going to claim any of the following as deductions on your taxes.
2. These are common tax deductions. They do not apply to every landlord, rental property owner or property investor.*
   
   For example, many of these deductions do not apply to those who rent out homes or condos which are also considered their residence. The property is considered a residence if you used it for personal use for greater than ‘X’ number of days in that year or ‘X’% of days that the property was rented out at fair market value. (These numbers will be listed on the current tax year's Schedule E or you may consult with your accountant).
   
   *You must consult your accountant or the IRS to determine the correct way to file your taxes and the proper deductions for your specific situation.

Common Tax Deductions

1. Depreciation

The depreciation expense is used for those things you have purchased for your business which have a useful life beyond the current tax year. For something to be considered depreciable, it has to meet three rules:

1. Be expected to last for more than a year.
2. Be valuable to your business in some way.
3. Different assets, such as a refrigerator and a building, will have different useful lives and there are different types of depreciation that can be used, such as straight line depreciation and accelerated depreciation. Consult the IRS or your accountant to determine the type of depreciation to use and the useful life of each asset you are trying to depreciate.

   2. Passive Activity Losses

   Owning rental property is considered a passive activity. There are complex rules which apply to passive activities, but in short, they limit your ability to claim losses incurred in passive activity against other types of income.
   There are certain exceptions:
   • If you are considered a real estate professional (certain rules apply such as working at least 750 hours a year on real estate related activities), any rental real estate activities you participate in are not considered passive activities.
   • or
   • If you are considered actively involved in your rental activity, you can deduct up to $25,000 in passive rental losses if you make under $100,000. Actively involved means you must have participated in making management decisions, such as finding tenants or deciding on the terms of your rentals, and your interest in the rental activity has never been less than 10% for the year. The amount you can deduct will decrease for every dollar your income is above $100,000. You will not be able to deduct any passive activity loss once your income reaches $150,000.

   3. Repairs

   You may deduct the expense of repairs incurred in a given tax year. Repairs are considered work that is necessary to keep your property “in good working condition”. They do not add significant value to a property. Repairs include things such as painting. It is important to understand that all maintenance you do on your property is not considered repairs. The IRS makes a distinction between improvement and repairs. Improvements are seen as adding value to the property. Improvements cannot be deducted in full in the year they incurred. Rather they must be capitalized and depreciated over their useful life.

   4. Travel Expenses

   Landlords are allowed to deduct certain local and long distance travel expenses that are business related. This does not include commuting expenses, meaning traveling from your home to your everyday office or place of business.
   If you have your own automobile for local travel, you can take your deduction using either the standard mileage rate or using the actual expenses incurred, such as cost of gasoline and maintenance on the vehicle. You can also deduct parking fees and tolls, interest on a car loan and any applicable registration or license fees and taxes.
   If you do not have your own vehicle, you can deduct your public transportation expenses for business purposes.

   5. Interest

   You can deduct the interest you have paid on business related expenses. For example: You can deduct the interest you have paid on mortgage payments or other business loans, car loan payments (but only the part used for business purposes), and the interest paid on credit cards used solely for business purposes.

   6. Home Office

   You can take the home office deduction if you use a part of your home exclusively as an office for your business. You must conduct the majority of your business here to claim the deduction. The amount you can deduct depends on the percentage of your home that your home office takes up.

   7. Entertainment Costs

   Unfortunately, entertainment costs do not refer to costs used to entertain yourself. Entertainment costs mean those incurred during business dealings. For example, taking a client to your country club or giving a potential investor two tickets to the theater are entertainment expenses.

   8. Legal and Professional Fees

   If you hire a professional to do work for you, the fee you pay to them is deductible. This includes attorney fees, accountant fees, real estate agent fees or fees paid to other professional advisors.

   9. Employee Compensation

   If you hire someone to do work for you, you can deduct the wages you pay to them as business expenses. This includes the wages of both full time employees, such as a property manager or a live in superintendent and part time employees, such as a contractor you hire once to fix a roof leak.

   10. Taxes

   You can deduct your property taxes, real estate taxes and sales tax on business related items that are not considered depreciable for the year. You can deduct fees for tax advice and the preparation of tax forms related to your rental real estate property. You cannot however deduct legal fees from defending title of the property, to recover property or to develop or improve property. You must add these types of fees to your property’s basis.

   11. Insurance

   You can deduct the premiums you paid on most types of insurance including health, accident, causality, theft, flood, fire, liability, vehicle, and health insurance for your employees.

   12. Casualty Losses

   If your property was damaged by a catastrophic event like a fire, you may be able to deduct some or all of the loss. The amount you can deduct will depend on your insurance and the amount of damage to the property.

   Other Common Tax Deductions Include:

   • Advertising costs.
   • Rent you paid to others.
   • Telephone calls related to your rental property activities. However you cannot deduct the first line for local service coming into your home. That is considered a personal line.
   • You can credit or deduct expenses paid to make your property accessible to individuals with disabilities or the elderly.
   • If your property is considered a commercial building, you can deducts costs to make it energy efficient.
   *You should always consult the IRS or a certified accountant to decide what deductions are applicable to your specific situation.