8. Specifics of real estate investment Tax liability and leveraging Making Real Estate Investments Real estate has been a lucrative investment for many years. Real estate provides greater diversification properties as compared to equity or fixed- income investments. Two important benefits to investing in real estate are the abilities to leverage investments and to decrease tax liability. Consider Deborah's case: In 2011, Deborah has an adjusted gross income from one job of $50,000 (not including any deductions from real estate loss). In addition, Deborah owns an apartment building that she rents out throughout the year. The revenues she received from her apartment building amounted to $150,000 in rent payments for the year. The operating expenses (maintenance, mortgage interest, and so forth) amounted to $90,000 for the year. Her income (her rental income minus her expenses). (before subtracting depreciation expenses) for the apartment building is therefore Her accountant has informed her that the apartment building can be depreciated u960,000 o for tax purposes in 2011; therefore,, she can subtract that amount). If her adjusted gross income were less of the depreciation expense from her rental income (and thus not of the depre s67.500 unt against her ordinary income. than $100,000 per year, she could write off $7,500 Suppose Deborah is interested in purchasing an additional apartment building as an investment. She has $40,000 in cash and can borrow an additional $120,000 at an annual interest rate of 9% to purchase a property costing $160,000. If the property is expected to generate $19,200 per the cost of paving interest on the loan. year after expenses, then the benefit from leveraging the investment Save & Continue Back to Assignment Keep the Highest: /4 Attempts: s. Specifics of real estate investment Tax liability and leveraging Making Real Estate Investments Real estate has been a lucrative investment for many years. Real estate provides greater diversification p income investments. Two important benefits to investing in real estate are the abilities to leverage inves Consider Deborah's case: In 2011, Deborah ha an adjusted gross income from one job of $50,000 (not including any deductions fro owns an apartment building that she rents out throughout the year. The revenues she received from her a rent payments for the year. The operating expenses (maintenance, mortgage interest, and so forth) amou (before subtracting depreciation expenses) for the apartment building is therefore (her renta Her accountant has informed her that the apartment building can be depreciated upto $67,500 for tax purp of the depreciation expense from her rental income (and thus not pay taxes on that amount 00 per year, she could write off of the depreciation amount against he $7,500 $60,000 borah is interested in purchasing an additional apartment building as an investment. She has $4 120,000 at an annual interest rate of 9% to purchase a property costing $160,000. If the proper $67,500 xpenses, then the benefit from leveraging the investment the cost of p. Grade Type here to search 99+ Back to Assignment 14 Keep the Highest: Attempts: S. Specifics of real estate investment Tax liability and leveraging Making Real Estate Investments Real estate has been a lucrative investment for many years. Real estate provides greater diversification prop in real estate are the abilities to leverage investm income investments. Two important benefits to investing Consider Deborah's case: In 2011, Deborah has an adjusted gross income from one job of $50,000 (not including any deductions from r owns an apartment building that she rents out throughout the year. The revenues she received from her apart rent payments for the year. The operating e e, mortgage interest, and so forth) amounted an additional 10 % (before subtracting depreciation expenses) Iding is therefore (her rental inc the remainder Her accountant has informed her that the ar be depreciated upto $67,500 for tax purposes an additional 50% of the depreciation expense e (and thus not pay taxes on that amount). Ifh than $100,000 per year, she could write off of the depreciation amount against her ordi Suppose Deborah is interested in purchasing an additional apartment building as an investment. She has $40,000 additional $120,000 at an annual interest rate of 9 % to purchase a property costing $160,000. If the property is e year after expenses, then the benefit from leveraging the investment the cost of paying Grade It Now Type here to search 99+ eep the Highest: 14 ment Tax liability and leveraging stment for many years. Real estate provides greater diversification properties as compared to eq penefits to investing in real estate are the abilities to leverage investments and to decrease ta oss income from one job of $50,000 (not including any deductions from real estate loss). In additi rents out throughout the year. The revenues she received from her apartment building amounted ating expenses (maintenance, mortgage interest, and so forth) amounted to $90,000 for the year. nses) for the apartment building is therefore (her rental income minus her expenses the apartment building can be depreciated upto $67,500 for tax purposes in 2011; therefore, she pense from her rental income (and thus not pay taxes on that amount). If her adjusted gross incom of the depreciation amount against her ordinary income. ite off outweighs chasing an additional apartment ment. She has $40,000 in cash and can borrow does not outweigh rest rate of 9% to purchase a pr 000. If the property is expected to generate $1 from leveraging the investment the cost of paying interest on the loan. Grade It Now Save & Ca Continue witho