The basic concept of depreciation is that your investment property is made up of two parts, the land and the improvements on the land, i.e., your house.

Appraisers will assign percentage values to your property based on these two parts. For this example, 20% of the value is the land and 80% of the value is the improvement. Over time, the house will deteriorate, the government (check with your tax advisor to make sure you qualify) lets you write down that 80% value over a certain number of years depending on the type of real estate. For residential homes, it’s 27.5 years.

This week we tackle the controversial and ongoing debate of good debt vs bad debt and chat about the pros and cons of each strategy. Do you purchase rental properties with no debt or leverage resources and possibly purchase more. We work through a couple examples and what has been working for us.