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Real estate has been a lucrative investment for many years. Real estate provides greater diversification properties as compared to equity or fixedincome investments. Two important

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Real estate has been a lucrative investment for many years. Real estate provides greater diversification properties as compared to equity or fixedincome investments. Two important benefits to investing in real estate are the abilities to leverage investments and to decrease tax liability. Consider Raphael's case: In 2018 , Raphael has an adjusted gross income from one job of $50,000 (not including any deductions from real estate loss). In addition, Raphael owns an apartment building that he rents out throughout the year, The revenues he recelved from his apartment bullding 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. His income (before subtracting depreciation expenses) for the apartment building is therefore (his rental income minus his expenses). His accountant has informed him that the apartment building can be depreciated up to $67,500 for tax purposes in 2018 , Decause his modified adjusted gross income (MAGI) is greater than $100,000, he can subtract of the depreciation expense from his rental income (and thus not pay taxes on that amount), and the remaining of the depreciation be written off against his ordinary incorme. Suppose Raphael is interested in purchasing an additional apartment bulding as an investment. He has $60,000 in cash and can borrow an additional $150,000 at an annual interest rate of 9% to purchase a property costing $210,000. If the property is expected to generate $22,680 per year after expenses, then the benent from leveraging the investment the cost of paying interest on the loan

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