french property prices

Owning investment property is a great wealth-building strategy. Thousands of thousands of people have amassed great wealth by investing in rental properties.

Unfortunately, there are few investment owners learn how to leverage equity in a way that maximizes tax deductions for the creation and locking in equity gains. Instead, they can be open to price fluctuations in the residential property market. These fluctuations can wipe out or severely reduce shares in the property.

Real estate boom to an end?

There is little doubt that we come to the end of a major boom in residential real estate. For the last four years, some properties appreciate rates. The question is, of course, what happens if the market cools off? Will we simply see a price plateau or an actual decline in prices? While nobody is sure, the clear consensus is the owner should strive for equity, while they can.

The protection of stock gains

Protection equity gains in the investment property requires careful planning. This leverage is fairly simple, but solid complex. Please note this is only an introduction to the investment property tax strategy. You must contact us to learn more.

The investment property tax equity strategy protects your profits through the separation and the use of them. The usage is best explained with an example.

Scenario 1 - without VAT strategy

Take a rental property in 1999 for $ 250,000 with nothing. From July 2005, the combination of loan payments and recognition has led to a profit of $ 250,000. They have amassed wealth, but everything is in danger. When prices fall twenty percent over the next year you will lose $ 100,000 of your equity in the house.

Scenario 2 - With Tax Strategy

We are to use the same exact scenario. It is July 2005, you have $ 250,000 in rental property equity, but all this is risk. You decide to implement the investment property tax strategy and the following events occurs.

Our goal is to protect $ 250,000 in profit from the rental property while the maximum tax reduction. The first step is to refinance the property with, typically an interest only loan. A certain percentage of equity income from the property and in an equity index insurance. The equity component results in the determination of the amount you can on the loan. Normally it is on your current loan payment amount.

Back to our scenario, what happens if property prices pull back 20% over the next year? You do not suffer the loss of 100,000 U.S. dollars through the purchase of insurance is in the equity index product. In essence it is a wash and you have protected the capital gains while capturing a stock market returns.

Ah, but it gets better.

Equity Index Insurance

The investment grade insurance is not just any policy. Instead, the policy we use is a stock market index. What happens if the stock market losses? Do not worry, this policy carries a guarantee that you'll never lose one U.S. dollars, even if the market crashes. When the stock market crash, the policy would simply credit you with nominal growth for the year in question. In all other years, the policy would relate to the stock exchange. On top of all these, the money in the insurance grows tax-free.

So, what has been achieved? Firstly, you have protected rental property equity gains from home price fluctuations. Secondly, you have leveraged your equity into two growth channels, the stock market and the appreciation of property prices. Third, you have converted taxable growth [property recognition] in tax-free growth [insurance].

With the housing market ready to cool down, this strategy effectively locks in your profits. The preservation of the equity gains should be a priority objective of all investment owners.

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