Real Estate Agent.  Realtor helping clients buy / sell Real Estate in Eastern Washington (Spokane, Fairchild AFB, Mead, Chattaroy, Nine Mile Falls, Newport and surrounding area) & Northern Idaho (Post Falls, Hayden Coeur d'Alene and surrounding area). Licensed in Eastern Washington and Northern Idaho. I help clients buy/sell residential homes, luxury homes, acreage, farms, ranches (cattle & horse), new construction, waterfront (Long Lake, Lake Spokane, Newman Lake, Liberty Lake, Lake Coeur d'Alene, Hayden Lake, Priest Lake and Spokane River) and investment / commercial property. Accredited Buyer Representative (ABR).
Spokane Washington, Post Falls & Coeur d'Alene Idaho ...investors

   
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Buying Investment Property In Eastern Washington or Northern Idaho?

Making correct investments can help at tax time and increase your wealth.

This page is for investors. The forms below are designed to assist in estimating the first year benefits of a real estate investment. It does not consider the effect of selling or exchanging (if you don't know what is meant by exchange see below) the property in the future. This form is not a substitute for legal or tax advice. Anyone contemplating the purchase of a real estate investment should seek the services of competent legal and tax advisors. Having said all that, used correctly, this form can help in the decision process to buy investment property based on Return On Investment.

          There are 4 financial benefits from owning investment property:

1. Income: Cash flow before taxes.

2. Principal pay down (by renters).

3. Income tax savings.

4. Appreciation.

It is important to look at 3 items closely: Income, Expenses, and Financing. Missing just one of these items and there is no way to determine if the investment is good or not. This form can also be used to determine when to sell investment property. Yes, you don't keep investment property forever and you don't pay cash for investment property. Both ways you lose the tax advantage and money. When buying investment property obtain the seller's Schedule  E which the seller sends to the IRS. This should give you all the important information such as Gross Operating Income and Annual Operating Expenses. This is the most important information you can receive from the seller. If the seller will not give you the Schedule E than I would worry the figures the seller is stating are not correct.  With that information it is easy to figure the Return-On-Investment as shown below.

Some information on Depreciation:

1. Land: does not depreciate.

2. Personal property: refrigerator, stove, etc, depreciate value over 5 years.

3. Residential rental buildings: home, duplex, 4 plex, (live in it more than 30 days), etc, depreciate value over 27 1/2 years.

4. Non-residential buildings: motels, condos, (rented by day or week), etc, depreciate value over 39 years.

5. Land improvements: sprinkler system, pool, fence, landscaping, parking lot, etc, depreciate value over 15 years.

For tax purposes the depreciation starts the day you buy the property. It doesn't matter how old the item or building is or if the seller took all the depreciation on his/her tax return. Each time the property is sold the depreciation on Personal Items, Building, and Land Improvements starts over.

Another important item to remember: when putting an offer in on a property, write in the Earnest Money Agreement Land value (15% of the purchase price), Building value (65% of the purchase price), Land Improvement value (10% of the purchase price), and Personal Property value (10% of the purchase price).