A property’s after-tax return is what really matters. The right structure and elections can materially change outcomes.
Core tactics
- Depreciation & schedules: Ensure you’re capturing full depreciation. Know the recovery periods and how improvements vs repairs are treated.
- Cost segregation (where appropriate): Accelerates depreciation on qualifying components; run the numbers to justify the study cost.
- Entity structure: LLCs are common for liability segregation; coordinate with your CPA on ownership percentages and basis tracking.
- Expense hygiene: Track mileage, insurance, professional fees, travel tied to management, and capital vs operating distinctions.
- Exit planning: A 1031 exchange can defer gains when swapping into like-kind property. Have timelines, intermediary, and replacement ID ready.
Record-keeping checklist
- Separate bank account
- Digital document folder (leases, invoices, escrow statements)
- Annual CPA review before filing