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FINANCIAL ADVISORY
What is Your Return on Taxes?
BY CHRISTOPHER MILLER, MBA SPECIALIZED WEALTH MANAGEMENT
We real estate investors are naturally tax averse. Even though we dislike taxes very much – taxes are probably even worse than you think? This month, we’ll talk about that.
WHAT IS YOUR RETURN ON THE TAXES YOU PAY?
What return do you earn on the taxes you pay? The common answer I receive is “Zero.” This answer is wrong – and it’s wrong by a mile! If we review our financial calculations, we’ll recall that a “zero percent return” means that we made a $100,000 investment and sold for $100,000 sometime in the future. A zero percent return means that we got our money back.
How much of your tax money do you get back? The common answer to this question is the correct one – “Zero.” Therefore, paying taxes and getting zero of it back equals a 100% loss!
TAXES GET IN THE WAY OF COMPOUNDING INTEREST
All investors can benefit from the concept of Compounding Interest. Our real estate may be appreciating by a certain number every year – let’s estimate it at 5%. Through compounding interest, the number that we are multiplying by 5% every year is constantly increasing, therefore compounding our interest. This is one of the reasons that rent control
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Christopher Miller is a Managing Director with Specialized Wealth Management and specializes in tax-advantaged investments including 1031 replacement properties. Chris’ real estate experience includes work in commercial appraisal, in institutional acquisitions for a national real estate syndicator and as an advisor helping clients through over four hundred and fifty 1031 Exchanges. Chris has been featured as an expert in several industry publications and on television and earned an undergraduate business degree and an MBA emphasizing Real Estate Finance from the University of Southern California. Chris began his real estate career in 1998. Call him toll-free at (877) 313 – 1868.
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