Buying and selling real estate can be a profitable venture, however foraying into development can be even more rewarding. Best of all, anyone can begin on the journey into developing real estate. All it takes is time, perseverance and focus. Here we will list for you a few key advanced real estate development tips that can help you as you progress along the way. Realestateinanacortes.com is dedicated to helping clients find real estate gems and opportunities throughout Anacortes, Oak Harbor and other areas of Washington State.
Launched A Construction Project
The first tip to consider with regard to real estate development is to always take full advantage of depreciation. Regardless of the type of corporate entity you have set up, depreciation can play an important role in achieving and maintaining profitability. For example, if your company has recently launched a construction project, a renovation or an expansion, there may be substantial savings over the long term in regard to all that the depreciation write-off has to offer. Talk with your CPA or tax professional to find out more.
Defer Any Profits Or Gain
Another important tip with regard to real estate development worth considering is the idea of exchanging real estate for bonds. Some developers choose to cash out of real estate and may wish to defer any profits or gain. Rather than rolling profits into more real estate, some developers may simply exchange property for various types of bonds. This is another case where tax consequences should be considered, so talk with your CPA or tax professional before proceeding.
Indirect Costs Being Capitalized
Proper capitalization is equally as important when developing real estate. Investors and developers should evaluate the methods of capitalization related to pre-construction costs. For example, are direct and indirect costs being capitalized with regard to future development? This may be another question for your CPA and is one well worth considering. Tax rules with regard to deductions play a major role in how capitalization is best managed.
Proper Allocation Of Costs
Finally, land or property developers may consider allocating land costs for their long-term benefit. Developers may find it useful to defer income when selling parcels of land that are part of a larger land tract purchase. It is important to consider the proper allocation of costs as it relates to the various parcels to ensure maximum tax benefit and return on investment (ROI). Your CPA can discuss all the particulars with regard to the IRS requirements relating to equitable apportionment.
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