Why Depreciation Makes Real Estate Such a Powerful Investment! (important for Airbnb hosts)

Why Depreciation Makes Real Estate Such a Powerful Investment! (important for Airbnb hosts)


Hey YouTube what’s going on it’s Richard
found of short-term rental university and Airbnb super host today’s video I
want to talk about one of the main reasons that real estate is one of the
best investments that I’ve discovered and it comes down to one word
depreciation so one of the things that makes real estate such an incredibly
attractive investment opportunity is the tax friendliness of it we’re gonna talk
about selling real estate in the future and deferring all the gains in 1031
that’s huge but there’s also this concept of depreciation you see the US
government and many other foreign countries really want people to own real
property and in order to encourage you to own real property as an investment
and a business you’re allowed to legally depreciate as an expense all of the
things that you buy so it could be the dishwasher and also the property itself
you’re not able to depreciate the land but the land tends to be a very small
portion of the value of the real estate that you purchase the vast majority
maybe 75 or 80 percent of the purchase property price is the building itself
now that building itself can be depreciated over I think it’s 27 and a
half years so every single year whatever it costs you divided by 27 and a half
and you have that expense the reason that becomes so incredibly valuable in
the short term rental business is that you should be positively cash flowing
meaning your short term rental business should not only be profitable on
accounting and on a tax return but it should also be generating cash and that
you can live on or save or reinvest the best part is unlike other asset classes
in real estate you can actually keep the vast majority of that because
depreciation is such a significant expense so check this out not only can
it be profitable and cash flowing but you also may not pay taxes on it and
that’s the best of all worlds that doesn’t exist in many other investments
so for instance if I own a portfolio of stocks and that generates income via
dividend I can’t defer that dividend I pay a
hundred percent taxes on that dividend now it’s at a lower rate so that’s
helpful but still I’d rather pay zero time
versus a lower rate of taxes real estate and depreciation allow you to do that
likewise if you have a portfolio of bonds say and that generates income
which is why people own bonds typically you have to pay taxes on that and the
thing about investing and compounding and we filmed the video on that is the
bigger your entire egg is or pie and the more you compound over time that amount
becomes hugely important so you want to defer or eliminate taxes legally as much
as possible in perpetuity and real estate allows you to do that so speak to
your CPA speak to your accountant speak to your bookkeeper figure out what it is
that you have as far as depreciation and again everything you buy whether it’s a
stereo or Sonos or a dishwasher that I think gets depreciated on a shorter
schedule check that I think it’s about seven years which is the useful life of
it and then the property itself is about twenty seven and a half and there’s
schedules so every single year you will have an expense for depreciation it
could wipe out almost your entire game you may even show a loss and end up with
cash in your pocket how beautiful is that
so in closing I just want to reiterate I’m not a CPA I’m not a lawyer check
with your own investment professionals I’m just here to tell you why I find
real estate so invaluable and such a great investment and why I’ve done so
well with it over the years but please speak to them figure out what you can do
but recognize that real estate is one asset class that allows you to defer
taxes minimize taxes and have a bigger nest egg or pie that compounds over time
so research it know the facts get it done and make sure that you file it
properly if you do so I think you’ll grow really quickly just like I have I
hope you found this video helpful please go ahead and leave comments below with
what you do or how you do it what your CPA says again the more that we share
the more that we learn the more that we grow I hope you liked the video if you
did thumbs up and if you haven’t subscribed to the YouTube channel now is
the time Charles hit him up with the bail quick

10 thoughts on “Why Depreciation Makes Real Estate Such a Powerful Investment! (important for Airbnb hosts)

  1. Well done

  2. Agree with your video Richard!

    Also as you mentioned, don’t think you will be able to manage everything by yourself, leverage your network, look for experts’ advice (CPA, Legal, etc) and learn at the same time from them!

  3. Thank you, Richard

  4. Good stuff! Loving that Big Green Egg too

  5. Very nice! Great information!!!

  6. My understanding is that you have to pay back the depreciation when you sell the property (let’s assume purchase price and sale price are the same). You really need to 1031exchange to keep the indefinite deferral going. Is that right?

  7. rather than saying "hey youtube" what you want to do is always act like you are talking to only one person. so you could just say "hey, what's going on" Because it is when you are speaking to a group of people you don't ever want to say "you guys" it just makes people think well he's just talking to a crowd of people so why bother paying attention, but subconsciously when you say "you" then it makes the person more alert and less likely to zone out because they think you are talking to them only.

  8. How do we join the Facebook group?

  9. Hi Richard, can you tell us what rates you normally get in deals for properties. I understand this might be personal thing, but I am not asking how much you are getting for your deals. Just for prospective partners, you know, I might be interested in investing in future. Thank you.

  10. Hey Rich! Next week I’m pulling the trigger with Anderson Asset Protection so I can turn my residence into the right LLC! It’s all about depreciation and keeping good books!

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