Question

Many real estate investors wait until the very last minute to pay their taxes, even though they are hit with interest and sometimes late penalties. Why do you think these businessmen/women willingly do this?

Answer 1

Many real estate investors wait until the very last minute to pay their taxes even though they are hit with interest and sometimes late penalties because the investors are trying to maximize their rate of return by taking the advantage of longer time duration as when the investment is for the longest time duration there will be a benefit related to capital appreciation.

Investors are also investing for the longest time duration and not worry about the last time about paying their taxes because they are also having a benefit in respect to getting the indexation benefit for the investing for the longer time duration and they are also taking an advantage in respect to the capital gains of the long period of time so they are reducing their overall taxes even though they are getting exposed to the interest rate fluctuations.

Hence it is always beneficial for investment for the longer period of time by by reducing the taxes even though there is a exposure for the interest rate fluctuations.