Housing experts claim recent tax reform moves could shake up the housing market. Landlords and real estate investment owners will likely come out ahead as fewer people feel incentives to take the leap to home ownership. According to an article by nytimes.com, tax reform would make the interest deduction on a mortgage capped at a half a million or half the existing ceiling. However, rental property owners will continue to deduct all property tax bills as well as mortgage interest, home owner association fees and other expenses as part of the cost of owning a rental. The IRS treats landlords as business owners.
Giving renters less incentive to buy
In addition to reducing the mortgage interest deduction cap, the tax reform bill also gives most people a greater incentive to take the standard deduction. When people take the standard deduction, they no longer itemize so the interest deduction becomes irrelevant. Without such incentives, many aspiring home owners will continue to rent. For landlords, that means increased demand for rental homes. By hiring a property management company to oversee your rental homes, it frees up more time and energy to focus on acquisition of rental homes and renovations. The home ownership rate was about 69 percent during the housing boom, but is now at about 64 percent.
Providing service and amenities
Hiring a property management company gives landlords peace of mind when renting to former home owners and more affluent renters with greater expectations. Some renters like the fact that they no longer have to fix a broken A/C unit or toilet, but don't like restrictions placed on them regarding landscaping and decorating. A property manager helps redirect renters unsure about the freedoms and limitations in a lease agreement. It's also important for tenants to follow the rules of the local home owner association or condo association.
At Housing Helpers, we provide property management service for real estate investors and mom-and-pop rental home owners. For more information about how the tax reform bill affects real estate investing, please contact us.
