Wednesday, August 30, 2006

What is Your Return on Equity?

I have heard the argument many a times, I don't want to sell because I own the property free and clear. That is a wonderful position to be in but not for the reasons you might think. One of the great benefits to owning investment property is the tax deductions. Mortgage interest is a large portion of it but many people over look the asset depreciation. You don't fully utilize all the depreciation you could get as properties increase in value.

The example below is the difference between a current property almost paid off and a new property bought through a tax-deferred exchange of the current property. Most investors will not hold a property for more than 5 or 10 years, here's why:

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