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A letter from my Lawyer about buying rental property!

Dear Friends, Clients and Associates,

As many of you should know already, we recommend that our clients purchase at least one rental property a year, no matter how large or small.  This goal is not only an incredible long-term and sometimes immediate tax strategy, it will inevitably build wealth for future retirement and should provide current cash flow benefits if you choose wisely.  Below I share an article on the 4 benefits of rental real estate and explain a diagram many of you have seen me give in a live presentation.
The problem is often times where and how do I buy that rental property.  On today's radio show I have some special guests that will talk about the where and a little about the how.  See below for more information on today's Radio Show!!


Radio Show TODAY, Tuesday, August 23rd - "Where in the US to Buy Your Rental Property this Year"... As many of you know, I recommend to ALL of my clients to purchase one (1) rental property a year (I'll explain the reasons again on my show). But, one of the biggest challenges in rental property investment is finding that 'perfect' rental. Today, we have special guest Jason Hartman joining the show who produces an annual nationwide report on the best and worst markets for rental property.  He and his report are amazing!! Please email your questions in advance to mark@markjkohler.com. Show time is always on Tuesday at 11am PST/ 2 EST- Set Your Calendars for future shows! You can call in and listen LIVE on the road at 646-200-4285 or you can listen in here from your computer. 

"YOUR ECONOMIC TRANSFORMATION"!! This Workshop is affordable, fun AND educational!! Students across the country are raving about it. The combination to save THOUSANDS in taxes and building WEALTH is incredible! Its only $399, and a partner or spouse is 1/2 off, and Clients receive 25% off (call the office for the Promo Code and information). For more info online visit here OR call the office at 1-888-801-0010.
September 15th - Sacramento, California
     October 6th - Seattle, Washington (Back by popular demand)
     October 21st - Little Rock, Arkansas... and more to come in 2011! 
     November 19th - Southern California (Location TBD)
     November and December (Dates TBD) - Boise, Idaho and Washington DC 

24 Days until your Corporate or LLC Tax Return is due!!! Please...Don't Procrastinate ANY LONGER if you filed an Extension-We need your INFO as Soon As Possible!!! Although you may have filed an Extension to file your 2010 tax return until September 15th (for Corporations and LLCs) and October 15th (for Individuals), please realize that we may not be able to complete your tax return if you drop everything off 30 days before the deadline. It is an extremely busy time of year; even more so than April 15th. Please be advised that unless we at NumberWon Accountants or K&E CPAs haven't received the bulk of your tax information 6 Weeks before the deadline we cannot guarantee we will have your 2010 tax returns finished by the appropriate deadline. Thank you for your understanding in this matter. 

Announcing our January Estate & Legacy Planning Edutainment Cruise!!  We have joined forces with Johnny Dessauer, national motivational and real estate educator, to create the perfect event with a combination of Entertainment and Education.  Then we thought...why not hold it on a Caribbean Cruise!! 

     Mark your calendars to join us January 23-28, 2012 (More information coming soon!!)

Why Purchase a Rental Property EVERY Year? (by Mark J. Kohler)... This may seem bold to hear from your CPA.  I'm not a realtor selling you real estate.  But I'm actually your advisor trying to help you save taxes and build wealth (something more CPAs need to take seriously with their clients). 

As I mentioned above, a good rental property strategy will not only to build an incredible long-term and sometimes immediate tax strategy, it will inevitably build wealth for future retirement and should provide current cash flow benefits if you choose wisely.  Here is a diagram of the 4 benefits to Rental Property I want to discuss briefly with you and suggest you consider this strategy seriously as part of your investment and tax planning strategy.

The 4 Benefits to Rental Property


Mortgage Reduction

Tax Benefits

Cash Flow


Appreciation.  This is rental property you are keeping at least 7-10 years.  This is not a fix and flip strategy.  The National Association of Real Estate Agents ("Association of Real Estate Agents") has reported that real estate nationwide has averaged over 6.74% appreciation during the past 50 years.  This rate of return out performs the S&P 500 and most Wall Street investments. Now I realize not all property in every market experiences this growth, but some actually do even better than the national average. Don't discount appreciation.

Mortgage Reduction.  This is often an overlooked benefit to rental property. Think about it. If you purchase wisely, the property should be at least be 'breaking even' in cash flow and thus the renter is paying the mortgage for you. The principle reduction in the mortgage instrument is an ongoing tax-free benefit along with appreciation as you hold the property.  This is a return you can calculate and count on over time with a typical mortgage.  Keep this in your spreadsheet as you calculate your total Return on Investment.

Tax Benefits.  It's no secret that rental properties lose money on paper.  With the power of deprecation, the fact you get to deduct the mortgage interest your renter is paying for you, and not to mention travel, property taxes, HOA fees, repairs, maintenance, home office, supplies, cell phone, etc... the tax benefits add up quickly!!  Now of course, as I have discussed in previous articles in my Newsletters, how you are 'classified' as a real estate investor is critical (Passive, Active or Professional).  However, at the very least, you will be able to carry these losses forward indefinitely to write off against future property sales, if you aren't able to deduct them immediately against your other income.  The tax benefits can be phenomenal.

Cash Flow.  If the economic downturn and the drop in real estate values have taught us anything, it's that we MUST analyze and purchase property based on cash-flow. Good rental property cash flows...bad property does not.  It's absolutely critical that we shoot to purchase cash flow property and mysteriously the other 3 benefits fall right into place.  It's amazing!! Ironically cash flow also becomes a rate of return and a tax-free benefit due to the ability to maximize all of the expenses related to rental property.

In summary, many a savvy investor realizes they can experience tax-free cash flow and have double digit, if not, triple digit rates of return on their leveraged rental property.  When it comes to the tax benefits coupled with quality investment strategies, it's no surprise that the most wealthy and successful people in America hold rental property as a large part of their portfolios in one form another.

To analyze your tax position in regards to rental property and how it would affect your tax return, please give us a call to schedule a consultation with one of our tax advisors.

Your Rights in Collections (by Lee Chen)... IF you have a debt you may owe, it's important you understand your rights! Debt Collectors collecting on consumer debts are regulated by the federal Fair Debt Collection Practices Act ("FDCPA").  The FDCPA applies only to "debt collectors," whose "principal purpose...is the collection of ... debts" or who "regularly collects or attempts to collect... debts owed or due [to] another."   The FDCPA does not apply to "original creditors," nor does it apply to non-consumer related transactions.   
However some states like California have enacted similar laws that do apply to "original creditors."   For example, if you go to the doctor and receive treatment, the FDCPA would not apply to the doctor attempting to collect his/her own bill.  However, if the doctor sends the bill to "collections" by a collections agency, then the federal FDCPA would apply to the third party debt collector.  

As a consumer under the federal FDCPA, you have certain rights which include:
    (1)  The right to dispute the debt and obtain verification of the debt  by notifying the debt collection agency in writing within 30 days after being notified of the debt.   If the consumer does not dispute the debt in writing within this 30 day timeframe, the collection agency may assume that the debt is valid.  Written disputes should specifically refer to rights under the FDCPA and should be sent by certified mail, return receipt requested. 
    (2)  Restrictions on communicating with third parties (e.g. family members), or communicating at unusual or inconvenient times and places.  Unless the debtor consents, a collector should not attempt communication during non-business hours or in places inconvenient to the debtor.  Generally, a collector may communicate with debtor's employer only to verify employment, locate debtor, or to garnish wages. 
    (3)  The right to require a debt collection agency to cease communications.   A debt collection agency must case communications upon being notified in writing to do so.  Such notice does not impair the debt collection agency's other collection options such as filing a lawsuit. 
    (4)  Prohibition on unfair collection practices, such as using physical threats, criminal means, harassment, misrepresentation, or other false or deceptive means to collect a debt. 
This is only an introductory list of your rights under the FDCPA.  For more on your rights under the FDCPA, please visit the Federal Trade Commission Website at www.ftc.gov.   You can find information on the FTC website about the FDCPA by doing a search for "fair debt collections."  

If you believe a debt collection agency has violated your rights, you may file complaints with the FTC, your state attorney general's office, or pursue a lawsuit for damages.  Lee Chen is our associate attorney running the California office for KKO Lawyers.  You can reach him for an appointment at 888-801-0010.


THANK YOU for subscribing to our E-Newsletter! To speak with one of our Tax Consultants at Kohler & Eyre CPAs, or NumberWon Accountants, or our Lawyers at KKO Lawyers, please call 888-801-0010. To get a copy of either of Mark's books with Free Shipping, visit www.markjkohler.com. Have a great week!!

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Mark J Kohler, CPA, JD PC 7700 Irvine Center Drive, Suite 800 Irvine, California 92618 United States 888-801-0010

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