Investing and Tax Strategies for 2023

[Julio Gonzalez]

As we close out on 2022, take a bit of time to reflect on the year and set expectations/goals for next year. 2022 was a wild year for real estate investors with the huge increase in interest rates throughout the year. That has caused many investors to rethink their strategies. One thing I do at the end of every year is evaluate how that year went and then make changes to make the next year more successful. That always starts with reviewing my financials for the year. Here’s a breakdown of my year-end review and goal planning.

1. Review your financials for the year. Look at which properties cash flowed and which did not. Look at expenses - were there any unnecessary expenses that you could cut down on? Did you have a high vacancy rate? What do you need to do to lower that? Does the property need repairs or upgrades to make it more desirable or do you need to change your marketing strategy? Are all your rents at market value? If not, make a list of when each of the leases are set to renew and ensure you do research prior to the renewal to know the market and be able to raise those rents.
2. What is your investment strategy for 2023?
   1. I'll start by saying, find an area that you're good at and stick with it. It's great to diversify and branch out, but make sure you've really nailed down your current investing strategy before starting another one. Instead of having 1 commercial property, 1 airbnb, 1 SFH mid-term rental and 1 multi-family property, pick one of those strategies, get really good at it and then add another strategy.
   2. How many doors do you plan to buy this year? Are there any planned renovations to current properties? Where will the funds come from for the new properties or renovations? Will you use creative financing or conventional methods? Do you want to partner with someone on a property this year? If so, what type of partner are you looking for? What paperwork do you need to have in place? Are you wanting to buy in the same market you’re already in or venture out to a new market? What type of property will you buy? What price point are you looking at? Do you already have an investor friendly real estate agent in that area? Write it all down and map it out.
   3. Are you looking to create new revenue streams? Consider 5G leasing for your property. Here are some FAQs on it: 5G Leasing
3. What is your tax strategy for 2023?
   1. Did you get to the end of the year and realize you have a large tax bill to pay? What could you do differently next year to avoid this?
   2. Do you or your spouse have REPS status? This is very tax advantageous. Or there is a STR loophole for being able to turn your real estate activity from passive to active investment activity.
   3. Have you considered a cost segregation study to accelerate your depreciation and increase your cash flow? Here’s more info: Cost Segregation Study
   4. Did you know you can 1031 exchange into a Qualified Opportunity Fund?
   5. If you have a historical property, are you taking advantage of the tax credits available?
   6. If you’re an owner, builder or developer of apartment complexes, townhomes or condominiums, are you taking advantage of the 45L Tax credits available?
   7. If you own apartments or commercial buildings, have you considered the Section 179D tax credits?
   8. If you have employees, have you looked into the Employee Retention Tax Credit?
   9. Here’s an overall list of the best tax strategies for real estate investors.
   10. If you need help, reach out to a tax strategist or tax specialist to make sure you have a sound tax strategy for 2023.
4. What areas do you want to learn more about?
   1. Do you want to learn more about tax strategies? If so, these are great books to read.
   2. Do you want to learn more about creative financing strategies? Brandon Turner has a great book on it.
   3. It’s crucial to understand the numbers and how to analyze a deal. Be sure to take advantage of BiggerPockets calculators and they also recently released a book that walks you through all of the calculations.
   4. Ask questions in the forums!
   5. Find a mentor!

What were your biggest wins in 2022? What are your goals for 2023?

[Henry Clark]

Good or bad actions or misses:

1.  Learned there is a cap on cost seg deductions.       

2.    Make too much to take Social Security.    

3.  Big gains in 2022.   Paying ahead on Property taxes and Insurance

4.  Ran out of time.  Since we had excess cash in 2022.  Wanted to install solar.  Move electric below the OP line for future years and to improve value based on Cap rate.   Take the year one this year.     

5.  Since we slowed down on our Growth, my wife went back and increased our self storage rates about $6,000 per month.  Pure cash flow.   Costs letters.   Maybe 10 what’s up calls from customers.   Lost about 8 customers but filled in a month. Cap rate of 5% for simple math.  $6,000 x 12 x 5= $360,000 value increase for notifying about 500 customers by letter.  Will do again in two years.  

6.  Used $10 from one unit for one month to order fried Sardines.  Wonderful.      

7.  Still trying to find out if I can write this trip off.  Looking at self storage in Italy and Sicily. If you ever see a post from Leavenworth you will know not to do.  Have a meeting Friday with a realtor to look for land. Haven’t found a single traditional self storage location.