| Investing in real estate can be very very good idea. In | | | | There are some exceptions. If you ARE primarily |
| fact many people turn to real estate to fund a major | | | | managing rental real estate and you have adjusted |
| portion of their personal retirement accounts because | | | | gross income that is under $100,000 or so then some |
| they just don't trust the volatility that comes with the | | | | of your real estate income may be allowed to offset |
| stock market. Especially during recession times like we | | | | some of your non-passive income. This may have |
| are facing today! | | | | been phased out though by the time you read this |
| With real estate they get income in the form of rents, | | | | article to be sure to check with your accountant or |
| and they also get steady appreciation in the form of | | | | CPA or tax attorney before hand. |
| property price increases over time. These increases | | | | Of course, if you don't lose money on your |
| usually keep track with inflation or increase greater | | | | investments; and really that's the goal anyway isn't it, |
| than inflation which makes them especially attractive | | | | then you don't have a whole lot to worry about when |
| for retirement type planning. | | | | it comes to offsetting passive income losses and if |
| But there is one thing you have to understand when | | | | you have most of your retirement income dragged into |
| investing in real estate and that is the passive loss | | | | real estate then that probably means that you don't |
| rules. Almost all rental real estate activity has been | | | | have significant stock market holdings which means |
| categorized by tax reformers as passive activity. | | | | you won't have much dividend income or capital gains |
| What this means is that losses from those passive | | | | income either so at some point this may be come a |
| activities can only be used to offset passive activity | | | | moot point to you but it's still something that you need |
| income only. You generally can't use it to offset | | | | to keep in mind and it's something that all real estate |
| portfolio income such as interest or dividends or capital | | | | investors should be thoroughly schooled in before |
| gains and you certainly can't use it to offset other | | | | making any types of investments whatsoever. |
| income such as salaries and wages. | | | | Investing in real estate can be a fantastic way to save |
| So what exactly does passive mean? Basically it | | | | for your retirement. Just make sure you know all the |
| means that the investor doesn't participate in managing | | | | tax rules backwards and forwards so that you don't |
| the investment in a day-to-day manner. You aren't out | | | | get walloped by the big bad IRS...Because the last thing |
| there fixing broken plumbing or stoves in your rental | | | | you want to do is spend your glorious retirement years |
| houses, for instance. Your main job is to supply the | | | | arguing with the tax man during a yearly AUDIT! With |
| money to buy the thing to begin with and that's pretty | | | | a little careful planning, you can make sure that doesn't |
| much all you have to worry about... that's what passive | | | | happen. |
| means. | | | | |