Real Estate Investment Tax

How I Make Paying It A Little Easier To Swallow

For the past 16 years I have paid every real estate investment tax you can imagine...

  • income tax
  • property tax
  • capital gains tax
  • employee related tax
  • you name the "tax", I've probably paid it

And those who know me well, know that I will go the extra mile to make sure that I don't pay a penny more tax than I absolutely have to. And that applies even more when it's real estate taxes that affect the NOI (net operating income) of one of my properties.

Why?

Because I know that every dollar I save in taxes, increases the value of my property by roughly $10. (See the section on how to increase the value of a commercial real estate investment for a detailed discussion of this.) But no matter how much I minimize my real estate investment tax each year, it is still painful to pay it.

Then I discovered something that made paying my property tax a lot more tolerable, dare I say fun!

A few years back I was going over my property tax bills when I noticed something on one of them. One of the cities that I owned two commercial properties in, actually accepted payment of real estate property taxes by credit card.

Now, not to sound like a broken record, but those who know me well, know that if I can pay for something with my credit card, I will. My family and I love to travel, and the points we gather through our credit card's loyalty program usually amount to enough to fly us somewhere tropical each year. And when I saw that property tax bill, the light went on.

If I paid the property tax on those two properties using my Visa card, I could generate enough points to fly my family (my wife and two sons) to Florida. These flights would typically cost us around $4,000 total.

Here's how I did it.

My Real Estate Investment Tax Into Lemonade Story

Just prior to receiving those property tax bills I had received an offer in the mail for a new credit card. (Actually, I had probably received about ten offers but this one I read for some reason. Maybe because it came from a bank that I had two mortgages with.) The offer was 15,000 "points" for signing up, and double "points" for any purchases for the first 6 months.

I did the math.

The property tax bills for the two properties I owned in that one city totaled close to $50,000. I would receive 1 "point" for every dollar I spent on the card, and 2 points during the introductory period. Therefore, after signing up for the card and paying the real estate taxes I would have 15,000 plus 100,000 equals 115,000 points. I needed 120,000 points (30,000 points per round trip ticket) to fly m family anywhere in North America. In order to get four tickets I was 5,000 points short.

No problem. As I said earlier, the light bulb had gone off.

I called every other city in which I owned real estate. Unfortunately, the city that accepted the credit cards was the exception to the rule. But I didn't stop there.

I called up any suppliers that I regularly did business with (utility companies, garbage collection companies, plumbers, elevator service companies) to see if they would accept credit cards. Sure enough, many did. You will find that many suppliers will accept credit cards nowadays. And when your property expenses get to be in the hundreds of thousands of dollars each year, the frequent flier points you can earn add up quickly.

Unlike many of the real estate investment "value adding" techniques that I teach, paying your real estate investment tax and other real estate related expenses with your credit card will not increase the overall value of a property. (I still haven't found the right column on the income statement where my accountant can include the points). However, it does make paying a lot of those expenses a littler easier to swallow when your relaxing in the sun every year!



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