Successful Multifamily Real Estate Investor Rob Rowsell is here to explain the answer to a burning question. How can YOU can cut tax drag that is sapping the returns from your investment portfolio. Do you want to invest your money wisely? Then you need to take the time to reduce your tax expenses. That is a key component in any multifamily real estate investment strategy. Watch, learn, and then apply this knowledge. Then, you’ll start saving on your precious investment taxes!

Cut Tax Drag On Your Investments Safely And Legally

Rob starts out by explaining that there are a few major expenses that we all want to avoid as investors. Tax drag is way up there on top of that list. There are just four key ways that our favorite multifamily magnate Rob Rowsell recommends for all investors to cut tax drag:

Choose Structure Over Deduction

First of all, you must make sure that you will always pay yourself tax efficiently on payday. Do you earn a W2 income working for a business that you own? Then your CPA will tell you that you must pay yourself a typical salary range for that position. However, you will want to pay yourself based on the low end of that salary range. That way, you will pay much less in both your income and your payroll taxes. If you are a smart business owner, then you should be able to afford to live on that smaller salary amount.

This practice of paying one’s self tax efficiently is a key component of tax rate arbitrage. The concept of tax rate arbitrage means you use different types tax rates within your business in order to lower your overall tax bill.

Finally, you will need to make sure that you will plan your exit before you go in. This means that you will decide the proper legal entity for your business, such as an LLC, S-Corp, or C-Corp. None of these corporate entity designations are wrong in and of themselves. You must decide which one is the right choice for your specific industry and your intended  pursuits.

Cut Tax Drag By Investing All Of Your Taxes Efficiently

Without a shadow of a doubt, savvy tax planning is the lowest risk way for you to immediately boost your investment returns. Rob repeats this important mantra often: saving on your taxes will create another income stream! Rob has saved well over $250,000 in a single year, all because of his CPA’s savvy tax planning strategies.

Most of the time, you will want to put your long term capital growth investments in your taxable accounts. Your ordinary income cash flow investments, on the other hand, should all go in your tax advantaged accounts. A Roth IRA account is one example of such a tax advantaged account.

Last of all, in order to invest tax efficiently, you should leverage your unrealized gains so that they will compound tax free. Your unrealized gains might include the value of your property increasing after you purchase it. Perhaps you bought a business and then you increased the income that it is generating. You are not taxed on that business income. That way, you could take out some low interest loans from your lender against those numbers. You could use that money in order to scale your business, so you can realize even greater success!

Pay With Your Pre-Tax Dollars

Rob’s third principle to cut tax drag is that you should pay your expenses with your pre-tax dollars. What does that mean for all of us investors? Make sure that you will push all of your legitimate business expenses into your business. When you do that, then you will earn your business an automatic discount. Unlike your employees who are paid and then taxed, an LLC business owner can pay their expenses before they are taxed on their earned income.

Plan BEFORE You Play

Finally, you will need to plan what the tax impact will be of each and every potential investment that you intend on making. Once you reach Rob Rowsell’s high  level of real estate investment savvy, you might just know by June what you will pay in taxes at the end of the year! That is one of the many advantages of regularly consulting with an experienced, hard nosed CPA on your investment plans. Just make sure that you meet with your CPA in order to plan your tax strategies regularly. Keep them in the loop as early in your planning process as possible. When your CPA knows all the machinations of your plans, they can stop you from making costly mistakes. Many plans can change when you are drawing up investment strategies. Whenever your plans take a left turn, call your accountant immediately, so you can make the necessary adjustments.