Reason why the purpose of real estate investment only for tax saving is bad for you
Some real estate company recommends you to do real estate investment because you can save money on tax.
This can be seen a lot in brand new individual 1 bed room type of investment.
What this means is that you would get negative by investing in it. That means you are in the red.
Because you are in the red so when you do aggression of profit and loss, your tax would decrease.
For example a person who makes 10 million JPY per year purchased a newly built unit room (120,000 rent monthly )for 300 million JPY with a 100% loan.
Monthly loan repayment would be about 120,000 JPY (Loan length 30 years, Interest rate 3%). This looks you are on break even.
However you need to include running costs, which means you are paying out of your pocket every month.
With the running costs and the depreciation cost, you can save on tax by creating “losses” on tax return.
As you come close to the end of loan period, the total amount of interests left decreases so it won’t be as efficient in terms of tax saving.
Tax saving shouldn’t be the main reason to do real estate investing. Firstly let’s start making stable rental income from your investment.
- List of Tax when selling a real estate
- List of Tax when owning a real estate
- List of Tax needed when purchasing a property
- Difference between tax saving and tax evasion
- Reason why the purpose of real estate investment only for tax saving is bad for you
- Tax Saving by Using a Corporation
- In case of Tax Investigations