End of Year Financial Planning For Real Estate Investors

September 15th, 2020

This has been a tumultuous year for everyone. We’ve experienced a pandemic, waded through dire economic predictions and still come out reasonably safe, thanks to some smart investing in turnkey rentals. In a few short months the year will come to a close and it’s unlikely anyone will lament saying farewell and so long to 2020. As the final quarter approaches, turnkey investors should be looking ahead at end of year financial planning. This year of all years, wouldn’t it be nice to enjoy quiet family holiday time without stressing about last minute plans for next year’s taxes? If you get started now you’ll be in good shape for the next tax filing date whether or not it ends up getting extended. 


Gather Real Estate Investment Records


Hopefully you have all your turnkey rental records already organized in one place. If you’re using a MartelTurnkey property management company, many of those records will be accessible through your landlord portal. If you haven’t done so on a monthly basis, take time now to download all the records for the year to date. Print them out or save as a PDF; whichever is your preference or your accountant’s preference. Include receipts for items purchased as well as rent deposit notifications. 


Ask About Upcoming Repairs and Replacements


The costs for repairs and replacements for your turnkey rental properties are tax deductible. Email or hop on the phone with your property management company and ask what upcoming repairs and replacements are in sight for your properties. Explain that you’d like to get the jump on these expenses so you can claim them on your 2020 tax return. Remember, this isn’t an excuse to unnecessarily spend money (unless you want to in order to offset income from other sources). You don’t need to come up with frivolous expenses like refreshing perfectly good screens in all the windows or installing shiny new doorknobs on all the doors in the rental. You’re looking for genuine concerns like an out of date furnace that’s on its last legs or a backyard gate with beaten up hinges – that sort of thing. Of course, if this is your first or second year with a MartelTurnkey rental, chances are there aren’t many repairs that are needed, since our turnkey rentals come fully renovated. Still, your property manager may be able to come up with some things that could be taken care of in 2020 instead of waiting for the end of the first quarter of 2021. This will give your tax accountant one or more extra deductions for next year’s return. 


Prepay Recurring Expenses


Another way to maximize deductions in 2021 is to prepay recurring expenses such as your property management fees, water or other utilities, HOA fees, insurance and landscaping fees. Note that some of these recurring expenses might run through your property management company (like landscaping expenses) so you’d have to coordinate with them to prepay those. Just don’t go overboard. Generally speaking, you won’t raise a red flag if you pay one month’s worth of expenses in advance in December. Consult with your CPA to ensure this is acceptable. 


Buy Rehab Materials Ahead of Time


Maybe some of your real estate investments aren’t turnkey rentals. A lot of real estate investors flip houses themselves. If this describes your business, you could save on taxes by purchasing some of your rehab materials ahead of time. There’s no harm in buying things like flooring, carpeting, cabinets and more and just setting them aside for when they’re needed. There’s also no reason not to take advantage of year-end discounts on rehab materials, which also saves you some money.


Delay Selling Property


If you have plans to sell a turnkey rental or a house you’re flipping, consider delaying the closing until after the first of the year. That way, whatever profit you make will roll over into 2021, when you have a lot more time to offset that profit with more deductions.


Buy a Turnkey Rental Now


Before the end of the year is the best time to buy another turnkey rental property. You’ll be able to start accruing deductions as a landlord right away and put your savings to work for you. If you’ve been on the fence about jumping into real estate investing, now’s the time to take the leap.  


By the end of this month, you and your family are going to want to concentrate on homework, holidays and having quality time at home. Before your schedule starts filling up, get your financial affairs in order. By the time you have to hand over your documents to your tax accountant, everything will be practically ready to go. And, taking action now will allow time for any last minute tax saving strategies that your accountant may recommend. As always, if you have any questions about our turnkey rentals, please feel free to contact us.


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