As the saying goes, don’t put all your eggs in one basket or you might lose everything at once. Portfolio diversification is key; having a variety helps mitigate the risk of the decline in your investment.
Real estate offers an excellent place to further diversify your holdings. Residential real estate allows for single-family, multifamily and even mobile home investing, while commercial real estate investing provides value appreciation, diversification of your portfolio and, the king of it all, cash flow.
U.S. tax law provides some benefits for real estate investing that don’t apply to other investment types. Depreciation paired with the 1031 exchange tax deferral makes real estate a safer bet than most investments in uncertain times.
Real estate is a physical asset and, similar to other physical property, depreciates over time. Accounting for depreciation on your taxes can be a powerful tool because the property isn’t a cash expense incurred by the owner every year, yet it allows for a potential decrease in taxable income resulting in tax savings. For example, a rental property with a net income of $200,000 is subject to a yearly depreciation expense of $50,000, which decreases the net income to $150,000. At a tax rate of 35 percent, this $50,000 yields a tax savings of approximately $17,000. The tax savings can be significant over the holding period of the investment. Be aware the depreciation expense taken every year lowers your cost basis in the property, important upon the sale of the property.
On the flip side, another potential benefit is the appreciation in property value. However, when a property appreciates, the tax liability can be significant upon sale. Let’s say a property purchased for $500,000 with an annual depreciation expense of $25,000 is sold after 10 years. The basis decreased from $500,000 minus $250,000 depreciation ($25,000 per year) to $250,000. The difference between the selling price and the adjusted cost basis is considered a capital gain and is taxable income. If this property sells for $1 million, the taxable gain is $750,000. Great investment but big tax bill! You may employ a 1031 exchange (a strategy derived from Section 1031 of the Internal Revenue Code), which allows you to defer the capital gain taxes on this sale so long as the proceeds are used to acquire a “like kind” property. A few rules must be followed to properly execute a 1031 exchange. With no limit on how many times a 1031 exchange can be completed, utilizing this tax strategy correctly can help your portfolio continue to grow as you invest in bigger and bigger properties.
While real estate investing can be a great way to diversify your portfolio, there is significant strategy involved. To maximize your earning potential and minimize your tax obligations, be sure to work with a business advisor who specializes in the real estate industry.
If fabulous food and beverages are a must-have for any weekend getaway, then look no further than the City of Brotherly Love. Whether your palate has a penchant for vibrant Latin American fare or cozy French cuisine, whether you're an oenophile looking to swirl, sniff and sip your way around the globe or you’d rather sample farm-to-glass cocktails, Philly’s got it all this fall. (With the exception of Bolo, which is a short taxi or Uber ride away and definitely worth the trip, the rest of these spots are all within walking distance of each other.)
Whether it's the people, the craic (fun) or the coasts, travelers always find something to love about the island of Ireland. What fills your heart?
From Santoríni to Dubai to New York, some hotels just have that “it” factor that draws visitors far and wide. For some hotels it’s their proximity to popular landmarks and attractions, for others it’s their amenities. But these hotels have something few can claim: a true room with a view.
The Global Business Travel Association (GBTA) believes business travel is a fundamental force for good and brings the industry together to connect, innovate and set new standards. With members from across the globe, GBTA engages the many voices of business travel to build a collective future, providing a platform for buyers and suppliers to come together, connect with peers, grow their network and shape the future of the industry.
Two historic Craftsman-style homes connected by a newly built third extension will take on a new life as the 19-room The Chloe Nashville in 2024. Developed to aesthetically harmonize with both Nashville’s past and future under the direction of Nashville-based Remick Architecture, guestrooms range from 400 to 817 square feet and start at $375 per night, with its top suite running $950 per night. The architecture and interiors maintain the original homes’ residential feel while incorporating modern and traditional design elements reflective of Nashville’s character and history.
A must for travelers seeking quiet on a plane or any noisy atmosphere, QuietOn’s newest launch, QuietOn 3.1, launches a limited-time sale on the product for last-minute trips this fall and winter. Originally selling for $289, QuietOn 3.1 is on sale for $50 off at $239 this Black Friday and Cyber Monday.
From the moment you step onboard Air Tahiti Nui’s Tahitian Dreamliner, you will be transported to The Islands of Tahiti. The French Polynesian carrier considered every detail to awaken its passengers’ senses, creating the feeling you are already on the Islands while 30,000 feet in the air.
With more travelers opting to book solo trips, Star Clippers invites solo travelers to embark on one of its tall-ship sailing itineraries with a special offer. Solo travelers who book by Sept. 30 will receive waived single supplements on a variety of itineraries through 2025.