Real estate taxes - is my deal worth it?
Hello,
I have been considering entering into real estate investing for both diversification and a way to spend my free time.
I have some questions regarding taxes since the taxes will either make or break the return it seems.
In the example, let's assume I purchase a property that provides $8,000 a year in rental income, and I can write off $2,036 and $2,225 in both depreciation and interest respectively.
Total operating expenses and total loan payments equal $5,784 per year.
My marginal tax rate in California is 25% federal, 9.3% state. So that brings the rental income down to $5,200 a year before any tax write-offs.
My question is how will the write offs affect how much in taxes I will pay? I would like this deal to be cash flow positive as there will be little appreciation, if any.
Thanks!