1)

Investment Property (Maximizing Tax Deduction Benefits for it)

Active income: Things listed on your W2

Passive income: Things like income from long-term (ie. a year) renting out your investment property (the income you get from your tenants)

For tax benefits, if you have a place as your primary residence, you can only deduct $10,000 from your taxes. For investment property, you want to turn it from passive income to active income . Why? so you can deduct the depreciation of certain things from your W2 (can’t deduct appreciation from passive). How to turn it active? You do short-term rentals using things like AirBnb. (There are 4 main things about a house that appreciates/depreciates: Land, frame of the house, appliances, and the pipes/electrical things). Although land appreciates, you can deduct depreciation of the frame of the house (I think setting the depreciation to $0 after 27 years is a thing). This only works for houses, and not condos.

2)

Return on investment example (buying vs. mortgages):

For your first year (say you buy a place that is $1000000, and it appreciates 6%, so at the end of the year it is worth 1060000:

• If you buy: (1060000 – 1000000) / 1000000 = 6% ROI
• If you do a mortgage (say the downpayment you paid is $200000): (1060000 – 200000) / 1000000 = 86% ROI

The one thing that the above does not factor in is the interest you’re paying on the mortgage that year (or the property tax).

3)

For condos, if buying, my sort of Golden Rule for buying vs. getting a mortgage vs renting is this:

The monthly cost of owning a place should not exceed how much I spend on rent in one month. Therefore, if the following is not true, than I rather buy:

(HOA) + (Property Tax) + (Mortgage Payment [interest portion only???]) – (Interest Deducted from Taxes) < Monthly rent

The reason for the above is that people say renting is throwing away money. Technically you’re throwing away money with HOA and Property Tax (so those definitely need to be below monthly rent)

4)

Mortgage Example

$2600 is the monthly  mortgage payment:

• $1400 in interest
• $800 Principle

Still need to account for property tax and HOA