If you’re not aware, there are some incredible recent developments that allow you to expense more of your repairs and improvements to rental properties. It’s not clear how long these opportunities will last…but you need to be in the loop. Keith Borg joins us today to share more…and you need to check it out!
Mike: Hey, it’s Mike Hambright from FlipNerd.com. We have a quick Expert Tip to share with you from Keith Borg who’s going to share a tip on the immediate write-off of improvements for your rental properties.
This expert tip is sponsored by RealtyMogul.com, BTR Finance and National Real Estate Insurance Group.
Keith: This new tip is born out of the new capital repair regulations that would then go back to the beginning of 2014, partial dispositions. The real advantage here is previously, maybe I bought an apartment complex for $1 million. Five years goes by and that apartment complex is now worth $1.5 million. When I bought that initial apartment complex, I also purchased the roof, the plumbing, the electrical, the building structure, et cetera and all the contents within it. If I were to replace that roof for $150,000 a few years later when the building is worth $1.5 million, you see that ratio is 10% of that new roof, 10% of the new fair market value.
I can go back to that original purchase and say, “I replaced the roof. Ten percent of the value there is $100,000. With the purchase of that new roof, I could write off that old roof for $100,000 and get $100,000 immediate write-offs.” This can be expanded to other areas with improvements and rehabs. Depending on the nature of what you have, the calculations are a little more complex. They factor in inflation and whatnot. But if you’ve got anything that’s where you’re doing big rehabs, that can be a great way to do so. These are going to be assets you hold long-term versus just flips. But it can be a great way to get some instant money back.
It’s also one of the great tools I use to also help people’s adjusted gross income go negative. My clients that are investing heavily in bigger projects or even small projects where they’re doing lots and lots of these partial dispositions because they’re doing big rehabs, can actually take a $500,000, a $1 million AGI and actually take it negative where they’re not paying any taxes for that year.
Mike: That’s great. Can you tell me how do people learn more about some of these changes in regulations? Where should they go?
Keith: Sure. You can look at our website at TheBorgFirm.com. You can also contact me directly. I’ve got some information out there on this subject.
Mike: What is this typically called though, the new regulations? If somebody did a search on Google, what would they search for?
Keith: If they search for partial disposition assets, that should bring up this topic.
Mike: We’d like to thank Crestar Funding, MidAtlantic IRA, and Renters Warehouse.
Please note. The views and opinions expressed by the individuals in this program do not necessarily reflect those of FlipNerd.com or any of its partners, advertisers or affiliates. Please consult professionals before making any investment or tax decisions, as real estate investing can be risky.