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Diversify Your Portfolio with Single-Family Home Rentals

Twenty percent of California households could afford to purchase the $760,260 median-priced home in the first quarter of 2023, up from 17% in fourth-quarter 2022. A minimum annual income of $188,400 was needed to make monthly payments of $4,710, including principal, interest, and taxes on a 30-year fixed-rate mortgage at a 6.48% interest rate.
With only 20% of Californians able to purchase a home, it is great for investors to get into the rental market. Particularly, if you are not in a rent control city. More and more cities in California are passing rent control measures.
Fourteen years ago, I interviewed ten millionaires and all but one had made their wealth investing in real estate. My parents started investing in rental properties in Ohio where I grew up. They reported that they paid for our college education through the rental income they earned from their properties. My belief is that you cannot own too much real estate.
One of the best reasons for owning rental property is the tax benefits. Renters have no tax breaks. While the federal government does not allow taxpayers to deduct rental payments from federal income taxes, homeowners could get a tax deduction for interest paid on their mortgage, property taxes, and improvement costs.
Here is a list of some of the tax deductions:
  1. Mortgage interest on a loan to buy or improve the rental property.
  2. Property taxes paid on a rental property.
  3. The cost of rental property (excluding the land) can be deducted as a depreciation expense.
  4. Maintenance and repairs for a rental property
  5. Insurance premiums
  6. Professional fees: property manager, bookkeeper, legal fees
  7. Travel expenses to meet with tenants, make repairs and check-up on the property.
  8. Operating expenses: office supplies, subscriptions, phones, management software
  9. Cosmetic upgrades: painting, power-washing, landscaping,
  10. Advertising: online, print or radio
The IRS allows you to deduct up to $25,000 from your rental property income. And a 1031 exchange allows you to defer capital gains taxes. This gives you a lot of incentives to build and own rental properties instead of selling them.

Work With Suzie

I’ve been a top-producing agent for ten years now, focused on Marin and the East Bay, two areas I love and know well. Clients can count on my market expertise, persistence, and diligent follow-through.
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