Bernstein & Feldman, P.A.

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Ways real estate can increase wealth

Many people in Maryland would like to invest, but they may not know which vehicle may work best for them. If they are interested in potentially investing in real estate, there are several ways that doing so may increase their personal wealth.

Landlords may have profits from their rental units, which are equal to the collected rents minus the properties' expenses. Landlords who have several properties may have profits coming to them from multiple sources. Another way real estate can help to build wealth is through appreciation in its value over time.

People who own rental properties also have some tax benefits provided to them by the government. Appreciation is not treated as self-employment income, meaning the property owner will not necessarily have to pay self-employment tax on that amount. Property owners may also be able to offset the income tax they might otherwise owe for profits by taking the depreciation deduction. When a rental property is sold, any gain will be subject to capital gains tax treatment, but the tax basis will be lowered by the amount of depreciation previously taken.

When people are interested in real estate transactions as a way to invest, they may want to get help from a real estate attorney who can guide clients through the process to make it go more smoothly. An attorney who has experience with these types of transactions may review any purchase agreement or sales contract in order to spot troublesome provisions in advance, and legal counsel can also help research the title documents to make certain the title is clean of defects.

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