Special Report – How Depreciation Benefits Business Owners
First of ALL: Do NOT Allow Yourself To Feel Bad about not knowing.

When I began my real estate business, I did not understand “depreciation” until I saw the huge benefits at tax time.

Then I really began to pay attention.
Depreciation: A non-cash expense that reduces the value of an asset as a result of wearand tear, age, or obsolescence. Most assets lose their value over time (in other words, they depreciate), and must be replaced once the end of their useful life is reached.
There are several accounting methods that are used in order to write off an asset’sdepreciation cost over the period of its useful life.
Because it is a non-cash expense, depreciation lowers the company’s reported earnings while increasing free cash flow.
Simple Example:
Suppose a painter buys an extension ladder for $1,000.00 and let’s assume the life of the ladder is 10 years. Although the painter is out $1,000 cash out of pocket right now in his purchase of the ladder, he can only “write off” $100 per year for 10 years because theladder has an expected life of 10 years. On top of this, the ladder will probably be worthZERO at the end of the 10 year period.
With real estate, we sort of get to do the same thing like the ladder.
We can NOT depreciate DIRT.
It lasts forever; however, the things built on the dirt, buildings and improvements have an expected life according to Uncle Sam.
RESIDENTIAL Real Estate improvements depreciate on a 27.5 year schedule.
COMMERCIAL is on a 39 year schedule.

What’s beautiful about real estate involves it usually holds it value and since we are at the bottom of the real estate market now, it will almost go UP IN VALUE again… and not down in value like the poor old painter’s ladder.

Example 1
Contractor Buys $10,000 Gutter Machine
Life of Gutter Machine = 10 years (example)
Contractor does NOT get to write off 10k the year of his purchase.
Contractor gets to write off 1k for 10years.
the remaining 9k is carried on his books as an asset and gets reduced 1k each year until it reaches zero.

Example 2
Investor with 10 yr Rental bought for $80,000
You generally cannot deduct, in one year, the entire cost of property you purchased, either for use in your trade or business or to produce income, if the property has a useful life substantially beyond the tax year.
Instead, you can depreciate it. That is, you can spread the cost over a number of years, and deduct a part of the cost eachyear.

The kinds of property that you can depreciate include machinery, equipment, buildings, vehicles, and furniture.
You cannot claim depreciation on property held for personal purposes.

If you use property, such as a car, for both business or investment and personal purposes, only the business or investment use portion may be depreciated.

You may depreciate property that meets all five of the following tests.
• It must be property you own.
• It must be used in a business or other income–producing activity.
• It must have a determinable useful life.
• It must be expected to last more than one year.
• It must not be excepted property. Excepted property (as described in Publication 946, How to Depreciate Property) includes certain intangible property, certain term interests, and property placed in service and disposed of in the same year.

To Your Continued Success!

Mike Butler

P.S. ALWAYS Check with your Tax Advisory and/or CPA before taking action.

NOTES From Video

80,000 dirt value is 5k
75k over Residential,….. 27.5  (25)
10 years….. Luke will give investor 150k this week for this house?
Fred Flintstone 3 Finger Depreciation Formula…
75k divided 25 yr = 3,000 year in depreciation
3k x 10 yrs = $30,000
—->>>> 80k minus 30k depreciation = 50k cost basis…
Sell for 150k ….. capital gain of 100k


 Yes, you can be creative and accelerate depreciation pretty darn fast.
do this only if you need it NOW and Yesterday…
500k year.. AGI….
if you got 30k in depreciation,.. yes, accelerating it would be good for short term benefit.
100 year AGI….
300k annual depreciation… WHY WOULD YOU ACCELERATE IT???
My Battle Plan is to always add to my cost basis to keep bumping.
I want Depreciation to outlive ME..
a lot of investors, veteran, they moan and complain of paying too much income tax..

paid for, FRESH OUT OF WHAT?…. depreciation…

When You Buy a Rental Property…
Becomes Part of the Cost of this investments…\\\
50k.. and do 16,000 in Capitalized Expense Account
 … at the end of year, tx into asset account.
now your investment is 66k….

Nuff on Depreciation

The Senate on Thursday backed a measure to help bolster the housing market by making it easier for people to afford a home in wealthier neighborhoods.

The Senate voted 60-38 to attach the proposal to a spending bill that the chamber will consider later this year. It would restore the size of the loans the government buys or insures to a maximum of $729,500 from the previous cap of $625,500.

The cap, known as the “conforming loan limit,” determines the maximum size of loans the Federal Housing Administration and the government’s mortgage buyers, Fannie Mae and Freddie Mac, can buy or guarantee.

The higher loan limit expired at the end of Click Here for Full Video/Article (Members Only)

This 4 minute video shows you 4 Resources (3 are FREE) for Rental Property Owners.

Register Now for 3 Day LIVE Landlord Training

January 20-22, 2012

“Certified Residential Property Manager Professional”




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Use the Resident Rewards ALL STAR Program to keep great tenants a lot longer.

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Training for Landlords and Property Managers

How To Get Your Tenants to Ask For a 3 year Rental Agreement

This is an On Demand Video Preview

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Fair Housing Training Part 4 

Do’s and Don’ts for Landlords and Property Managers

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Close Your Bank Savings Accounts Today!

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update provided by Andrew Teutsch (a raving fan of Mike’s Power Lunches)


Sleep Easier

No landlord wants to bring up the subject of bedbugs with tenants.

Unfortunately, the scary stories are everywhere–including the most recent discovery that the bugs may spread disease, and tenants are bound to get spooked.

There’s a new device that can detect bedbugs at the first sign, and at the same time offers reassurance if there are no bedbugs in the unit.

Landlords benefit by finding out early if the unit is affected, so the bugs can be exterminated before they spread everywhere and frighten all the tenants. 

That saves money, and means fewer complaints from tenants. 

This device is a clear, safe, rigid plastic about the size of a Click Here for Full Video/Article (Members Only)

After having another Straight Line Wind Blast, Mike Butler shares tips for your tenants, insurance, restoring service quickly, along with do’s and don’ts.

The same set of storms that hit Indianapolis during the Sugar land concert causing the entire stage and rigging to crash into the audience killing 5 people.




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