How to avoid taxes and build wealth the real estate way

Tuesday, February 11, 2014

How to avoid taxes and build wealth the real estate way

The salaried class in particular doesn’t have to worry much about paying taxes. The employers take most of the headache.  Though, the employers complete the tax paying job at the tax payer’s office, yet, it is equally valuable to know what lies in store for them. The business class has an array of options to pay taxes, which may include travelling expenses, and many other drawers, but salaried class has a fixed set of options where they can make their savings. Insurance being one of them, though, I am not too convinced that they actually help build your wealth.
Image credit: alexskopje / 123RF Stock Photo

I want to relate a real life story on how a person actually made a lot of money and also saved taxes at the same time. That person incidentally is my close friend. He was in need of a house in a particularly expensive city and was looking for a housing loan. Once the loan was approved, he bought a large apartment at a prominent location in the city. Within five, years, the real estate prices increased. With the baggage of a loan weighing on his mind, he decided to sell the house, and repay the loan off.

Believe me; he sold his apartments close to double the amount he purchased. There were two advantages that came along his way. The first, that he was able to avoid taxes during those 5 years, and secondly, he made a massive profit with the sale of his house, which incidentally enabled him to invest heavily on other projects. That’s the kind of profit associated with making the right real estate investment decision.

Key points to remember

There are few things here, which should be taken into account. No matter what kind of work you do, there are possibilities that you will have to endure the burden of tax. When you do seem to face that kind of situation, you have a choice. Either you pay taxes or get a home loan. If the taxes don’t amount to a great deal of money, then you might prefer to pay taxes. But if, the tax amount starts to hurt you, you don’t have a choice; better take a loan to buy a property.

You can now save taxes, and it also helps you to lay a platform to create wealth by selling the property, when the price of your property increases. However, you should exercise a certain degree of caution when buying a house. Learn about the place where you intend to buy a house. The place should be located in a prime location, and it should soon be a highly sought after area in terms of real estate marketability.

By Rajiv Sighamony

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