How to use Tax to Improve your Real Estate Investing and Wholesaling Returns by 50%

There is an Art in managing tax for optimum results

If you are interested in SERIOUSLY improving your returns it is best to utilize Wall Street style Corporate Finance strategies rather than an accountant's typical approach. Instead of reaching for expenses as tax deductions Income Tax is best managed by not having current year income - so the 3 avenues are Reduce, Defer and Eliminate INCOME. As a consequence of having less income to assess obviously there is a proportional drop in tax.

It does not require any knowledge of accounting and only basic math is involved in doing the calculations - without a calculator.

As it is never too early to plan your taxes best to start at the beginning of each financial year and structure each Real Estate Deal before you sign any contracts. How the contract is set has a large bearing on how effectively you can manage the incidence of income tax on every buy and sell two sided transaction..

A proactive approach to Tax Management can improve your after-tax net profits by a MASSIVE 50%.  If you are making money you will use an INC and be liable for 40 cents in the dollar tax on your profit. Say you make $100,000 before tax then you lose $40k and end up with only $60k. If you were to save $30k so you net $90k after tax -- your net profit goes up by 50% ... no calculator to work that out huh?

Look at how RE Wholesalers and Investors usually go about contracting with Sellers. *When they choose to do quick deals and pay 100% cash trying to get the lowest price both lose - as for every dollar cut off the Seller's price they lose a dollar and the intermediate buyer/wholesaler/investor who resells in under a year incurs a 40 cent tax liability - which means together there is a loss of $1.40. By structuring the contract you can achieve the same low cash on settlement figure you want for maximum profit simply by utilizing trade credits, deferred settlement of the balance or a combination of the two - or other straight forward tools used by Wall Street.

Note - if that $1.40 were invested and the Buyer and the Seller shared the returns both could be infinitely better off - especially if leverage is utilized.

Take some time to see how the BIG players use tax rules and Corporate finance to not only pay little tax but also make huge investment returns when they invest and leverage the tax they do not pay.  And if their investments do not pay off they claim a tax deductible loss.

George Soros for instance has deferred tax on well over $11Billion - and uses the deferred tax to earn more - which ultimately could be used to cover any of his tax liabilities if he ever chooses to pay tax instead of extending the deferral of tax.

Combine that strategy with Gearing and you can use deferred tax to pay interest on funds borrowed for investment and that even creates tax deductible expenses that offset and reduces the incidence of tax. That is a strategy Google uses to borrow its Billions of offshore un-taxed profits instead of repatriating earnings to the US and lose 35%.

Obviously it takes a lot more detailed explanation and illustration to fully explain before you grasp how easily you could be financially better off. But just doing numbers the way financial accountants approach tax management will not cut it. You might like to learn more (click the link)