Your second home is a material asset you can use for your own enjoyment, a source of tax benefits and a means of generating cash flow. The following strategies will keep your investment primed for on going appreciation.
Use all tax exclusions allowed by the federal government. If you sell some property, try to make a tax deferred exchange and reinvest your money in another property. Claiming depreciation on each rental property reduces your taxable income. Consult with a tax attorney to maximize your yearly deductions.
Look for ways to reduce your operating costs by increasing the energy efficiency of the building. Keeping your property well maintained preserves its value and ensures that you can attract more tenants and charge a higher rent.
Create a schedule for incremental rent increases that keep pace with market standards. Tenants expect rents to go up over time as the cost of living increases. Build up equity in your property by making additional yearly payments on the principal. Reduce the amount of interest you pay over the term of the loan by refinancing to a shorter-term mortgage.
