How Investing in Land Can Benefit Your Taxes

Making the decision to purchase land offers lifetime benefits. The more time you have owning the property, the more your land will appreciate.
But that’s not the only benefit you’ll get out of this worthwhile investment!
As a landowner, you may be eligible for certain tax deductions depending on the property and the purpose it serves, and the land developers at SRC Land want to discuss this a little more in depth for your benefit.

But before we dive in, if you are new to buying land in Harlingen–whether it be for commercial or residential purposes–don’t forget to check out our other blogs that demystify the initial process.

Land Investors Get Deductions

As someone who invests in land, you are considered someone with hopes that it will ring in appreciation and raise in value. Whether you decide to buy raw land or property that you intend on renting out for income, deductions should be available.

  1. Interest Deduction
    The same process someone would follow to acquire a loan to finance a home applies to investors who might need to borrow money to buy their land. Interest will add up based on how many years you own and pay for the property.
    You can be eligible for deductions on interest when choosing to file taxes as an itemized personal deduction. A yearly deduction or “net investment income” is limited to the difference between the annual cost of property tax costs and investment expenses (not including interest expenses).
    If you own the investment land by yourself, you may also wish to get back interest deductions on IRS Schedule E.
  2. Property Tax Deduction
    Those who have invested in property with the intent of building a home but have not yet done so may not be able to claim interest and property taxes unless they have a loan ready for the process of preconstruction.
    Vacant land owners should ensure that their loan is secured before filing their taxes to offer some security being placed into their future potential home. If the loan for home building is voided, then vacant landowners may not request property taxes.
    It is in your best interest to have tax deductions for “raw land” filed as a personal itemized deduction under Schedule A for those that have a loan prepared.
  3. Rental Property Deductions
    Property owners may take deductions if they happen to rent out the property by filing under IRS Schedule E along with their corporate tax return.
    Depreciation deductions can be sought out if you rent your investment property for buildings like apartment-style homes or even commercial businesses. These kinds of deductions are applicable for whatever is affected by the renter.
    These deductions may also apply for property improvements which are being prepared for commercial usage, including developing streets on the land for businesses to use.

Capital Gains and Reduced Tax Rates

Capital gains are the profits that investors make when selling their property, whether it be residential, commercial, or industrial property. Capital gains provide a reduced tax rate contrasted with average income tax.

There are primarily two ways this is taxed:

  • Short-term: These gains on property are held in less than a year. There are no special tax benefits that come from short-term gains since it can fall 10% to 37% depending on your income.
  • Long-term: These gains come from property that was upheld for more than a year. This is mostly relative to rental properties and guarantees a significantly lower tax rate when compared to short-term gains.

As an investor, you want to make sure you have leverage on long-term capital gains. Not only will you have a decreased tax rate, but you can also take advantage of deductions acquired over the property-ownership period to reduce the taxable estimate.

How Deductions are Different for Real Estate Dealers

Individuals who are investing in land for the purpose of re-selling at a higher rate are also able to apply for deductions. They would be able to access the same deductions that an investor would be, such as interest and taxes deductions. As a sole proprietor, you would file under IRS Schedule C. The only thing you wouldn’t be eligible for is depreciation bills.

Investing in Land Is a Worthwhile Investment With SRC Land

Even though you will be expected to pay off taxes when you buy land, it is a worthwhile investment due to the simple fact that land can increase in value as time progresses, or you can even make an influx of income while renting it out.
If you have an interest in investing in a property, remember that all forms of land purchasers can apply to some degree of deduction on tax and interest.
Find the right investment for you when you call SRC Land for more information on our reasonably priced properties for sale in Harlingen.

Find the right investment for you when you call SRC Land for more information on our reasonably priced properties for sale in Harlingen.

Contact SRC Land Now

Everything You Need to Know About Seller Financing

Financing real estate transactions follow a standard practice that involves factors such as meeting income requirements, employment verification, and assessing a prospective buyer’s credit score to determine eligibility for a mortgage from a bank or other financial lender. 

But what happens when a buyer isn’t able to satisfy the requirements needed to secure a traditional mortgage loan, yet still wishes to move forward with a real estate transaction? In these instances, seller financing is a great opportunity for a buyer to continue on a path towards homeownership while avoiding the restrictions of bank lending, and it is a service that SRC Land takes pride in offering to aspiring landowners.

Understanding Seller Financing

To put in the simplest terms, seller financing is the opportunity for someone selling a home or property to finance the purchase for a buyer rather than requiring a prospective buyer to seek a bank’s assistance in securing a mortgage loan. 

Seller financing grants the buyer a chance to purchase property quickly and at a lesser rate than that of a traditional and/or conventional transaction. 

Important Aspects of Seller Financed Real Estate

A seller-financed property will likely run for a shorter period than what would be expected as part of a conventional mortgage. It’s important for a buyer to inform themselves on the terms of the financing agreement to ensure a desired and favorable timeline for repayment. 

Both a seller and a buyer should hire a professional to prepare the contract and promissory note as well as discuss any matters that require further explanation or clarification. 

 Why Seller Financing is a Wise Move

Sometimes a mortgage isn’t easy to secure, and purchasing property under seller finance terms is a fantastic alternative in cases where there isn’t a clear path to move forward via a bank or financial institution. Accessing alternative forms of credit is an advantage for prospective buyers, and when a seller is financing a sale, oftentimes a property may command a higher sale price.

Aside from a quicker and less expensive way to buy a home, seller financing offers buyers the chance to save money on fees generally associated with traditional lending. In transactions involving only two parties, it’s appealing to be able to avoid many of the costs associated with conventional real estate transactions. 

Seller financing guarantees better terms than what a bank or financial institution would provide through their traditional lending options. A seller-financed deal may give a buyer more flexible terms, and access to more ideal financial options for their specific needs. 

Quick Guide To Common Types of Seller Financing

  • All-Inclusive Mortgage: Also known as an all-inclusive trust deed (AITD), this option offers the seller the option to carry the promissory note and mortgage on the entire balance of the home price deducting the down payment. 
  • Junior Mortgage: If there’s reluctance from a lender to finance more than 80% of a home’s values, sellers may extend credit to the buyer to make up the difference. The seller carries a second, or “junior” mortgage for the balance of the purchase price, deducting the down payment. 
  • Land Contract: Land contracts don’t involve passing the title to the buyer. Rather, the buyer is afforded an “equitable title,” or temporary shared ownership. A buyer will make payments to a seller, and once the final payment is received, the buyer receives the deed. 
  • Lease Option: This option allows a seller to lease a property to a buyer for a contracted term, much like ordinary rental property. However, a lease option lets a seller agree to sell the property to a buyer within an agreed-upon time frame and in return for an upfront fee. Varying terms under a lease option can be agreed upon between a buyer and seller, offering a flexible alternative to the traditional lending process. 
  • Assumable Mortgage: An assumable mortgage offers a buyer to take a seller’s place on the existing mortgage. In these scenarios, a buyer may assume a Federal Housing Administration (FHA) and Veteran Affairs (VA) loan, along with a conventional adjustable mortgage rate (ARM) with the bank’s approval. 

SRC Land works with customers to make the dream of owning land a reality. For over 20 years, we’ve offered seller financing options that work to put our customers on a clear path to a prosperous future by providing low down payments and affordable monthly payments regardless of bad or no credit. 

Let SRC Land offer you the best in seller financing options and an easier way towards realizing your dream of owning your own property.

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Bust These 4 Common Misconceptions About Land Values With SRC Land

When looking into land values in 2020, it’s no surprise that they can vary. Given the state of the current health pandemic we’re in, it only makes sense for the value of certain properties to fluctuate.

Several factors have created an uncertain market for land values such as an economy stuck in limbo and a stock market following suit, new land and trade laws, along with an unclear prediction of how the rest of this year will play out. Despite this, it’s imperative to have a good understanding of the concept of land values, especially if you’re thinking about purchasing property. 

Let the property professionals at SRC Land set the record straight on the most common misconceptions about land values for sale in Texas.

#1: Land Values Reflect the Stock Market

It was once a general rule of thumb that land values reflected the stock market. Over the years, however, this hasn’t been the case. There are numerous factors that affect the value of land in Texas, including natural disasters, local and national laws, commodity prices, rate of return, and more. While the stock market can be a good indicator of what direction the economy is going, it can’t be the primary factor you turn to for verifying land values.

#2: A Higher Demand for Crops/Livestock Means Higher Land Prices

This is not necessarily true. Even when a particular crop or type of land is in high demand, there are various outside factors that can keep the value of the land from increasing.

Even the highest quality land can be hit by forces outside of the land owner’s control. For instance, if you were a landowner in the forests of East Texas and the area was deep into a drought, this could harm the land value even when the demand for forest productivity–something that would increase this particular land’s value–is high.

#3: Decreases in Land Values Mean All Land Values are Suffering

While the majority of land markets are interconnected, there are many types of land that may thrive, even while others are doing poorly. For example, a drop in hunting can lower recreational land values.

While landed used for recreational activities like camping or ATV-ing hasn’t lost its appeal or popularity on the market, it is crucial to also take hunting into account when evaluating the overall land value.

#4: There’s No Guaranteed Way to Predict if Land Values Will Go Up or Down

Looking at the state of today’s land values, it’s natural to view them as unpredictable. While this holds some truth to a certain extent, there’s one surefire way to indicate what can increase the value of a property, and that is whether people move into the specific area surrounding the land. As the population rises in a given region, the demand for land will also typically increase. This boosts the desirability and price of the property. 

Let SRC Land Be Your Guide in Finding the Perfect Piece of Land

Land values can be complex. They can be tough to track, but understanding the common misconceptions about land values might give you a better idea of the value of your own land.

The best way to learn more about a property and its value would be to seek an experienced land consultant that knows the in’s and out’s of the local market while also taking the dozens of separate factors into consideration.

 

Don’t let misconceptions keep you from becoming a landowner. Contact SRC Land today to start your journey.

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Five Perks of Buying Land in Texas

Besides the rolling hills in Central Texas, vast fields of green in East Texas, and majestic mountains in West Texas, there are five other perks of purchasing land in Texas.

If you’re searching for land for sale in Harlingen or another Cameron County town, SRC Land can be your helping hand with their experience in decades of real estate and land development.

1. Property Tax Exemptions

When you purchase land in Texas, you may be eligible to qualify for a wildlife,  agricultural, and/or timber exemption. These exemptions can minimize your yearly property taxes significantly. The exemptions are given for land that’s utilized for agriculture, including for pasture and grazing land, timberland, and wildlife preservation. 

2. You Can Write Off Exemptions

Another financial advantage when it comes to buying land in Texas is that you may file a Schedule F in your federal income taxes. This applies to people who use their land specifically for farming.

What’s great about Schedule F is that it enables you to write off expenses assigned via farming, such as interest on a loan taken out to buy your land. On top of that, if you were to build on your property, you might be able to claim the interest on the construction loan in your federal income taxes.

3. You Can Invest and Profit Off of Your Land 

If your intent of buying land in Texas is to start your own business, you will discover that there are a plethora of businesses you can get into that you can’t in other states. You can consider opening an inn or bed and breakfast if your desire is to provide unmatched hospitality services, or you can go for a more rugged approach by opening up a hunting lodge and/or camping grounds. Whatever profitable venture you wish to achieve with the land you purchase is only limited by your imagination.

4. Financing in Your Favor

The majority of people aren’t in a position to raise the necessary funds to purchase land with only one payment. People that look to buy raw land also encounter an obstacle due to the fact that banks and other conventional lenders do not comprehend how this market works. One reason is that they may not have ways to accurately figure out the value of land as it is.

If you’re looking to buy land in Texas, you may borrow from lenders who finance the purchase and development of rural land in Texas. Certain financing companies are landowners and farmers who understand the necessities and difficulties that come with looking to buy land and engaging in agribusiness.

5. Extremely Affordable Rates

Getting the funds to buy land can be a challenge. The good news is buying land in Texas is very affordable. While rates from one area to another differ, generally speaking, purchasing land is a practicable investment that is far more affordable than buying or constructing commercial buildings.

Simple, Affordable, and Seller-Financed Land in Harlingen

If you’re looking to purchase land in Texas, you will not find better deals than those provided by SRC Land. We are a premier land development company, and we take pride in our affordable parcels of land available for sale in Cameron County.

 

If you’re searching for real estate in Cameron County, you can count on SRC Land to find the right place depending on your needs today.

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