Tax Benefits

• Only pay taxes on gains / income. Therefore if you are able to deduct more expenses, your income decreases, leading to less taxable income.
• You will often hear many real estate investors paying no taxes! Therefore you may actually cash flow a significant amount, but pay no taxes in that year on that cash flow.
  
• Interest payments on mortgages are tax deductible.
• Depreciation can be used to offset income generated by the renal properties. With commercial properties, there are even large benefits via bonus depreciation.
  • "Bonus depreciation is a tax incentive that allows a business to immediately deduct a large percentage of the purchase price of eligible assets, such as machinery, rather than write them off over the "useful life" of that asset."
• 1031 exchanges all you to not pay taxes on selling a property if you use proceeds for another property. Used by many. There are very specific rules you must follow, so consult a qualified real estate accountant / attorney.
• Also can refinance tax free!
  • So instead of selling a property to access the equity, you can do a cash out refinance
  • Say you bought a rental and after 30 years from mortgage paydown you own $1M of equity. Instead of selling, paying taxes, paying realtor fees and other expenses, you can get a new loan, or cash out refinance.
  • Since this is a loan, there is no taxes!