Investing in rental property can be a lucrative endeavor and provide years of additional income for the investor. But if you’re a rental property owner and are still working in your primary career, it’s almost impossible to dedicate the amount of time required to maintain it. That is why it is advantageous to hire a property management company in order to handle the day-to-day issues with your investments.
Your management team can provide a number of benefits including the following tax advantages:
- Deductions – As the owner of the property, any professional services that you hire to help maintain your investment – such as a property manager or management company – are tax deductible and will lower how much tax you might owe. In order to claim the costs of these services, you have to maintain impeccable records and keep any bills, invoices, and statements issued by your property management team.
- Delegation – Even if you live in close proximity to your rental properties, there may not be enough hours in your day to manage several of them on a daily basis. If you don’t want to manage your properties full-time, you can always delegate the responsibilities to a property management company in order to have more time for career and leisure. The suppliers and vendors that the management company hires in your best interests are also tax deductible. It can also provide overlooked deductions such as low-cost, energy-efficient upgrades to your properties.
- Long-distance benefits – While living a long distance from your properties is not what you would call a tax advantage, your property management company is the buffer between you and your tenants. This can be extremely useful when it comes to filling out paperwork and handling all daily operations. It is especially useful when they issue all maintenance and repair invoices to you, thereby keeping all deductible expenses under a single source.
- Organization – The lack of organization in accounting and tax record keeping is the property owner’s biggest enemy. Conversely, the right property management company can help you with organizing, managing, and issuing documents between you and your tenants. This is especially helpful during tax season, especially if you’re not that good at organizing your accounting paperwork. Your property management company can help you with the credits and deductions that you are permitted to take but may have missed when you were filing your taxes in the past.
The reality is that many real estate investors are aware that some of the expenses they incur through their property management company are tax deductible. However, your management team will ensure that you don’t leave anything on the table and fail to use specific tax rules that they can easily benefit from.
With plenty of companies to consider, it is important that you consider all aspects before signing the agreement.