Depreciation to offset W2 income

[David Lao]

This is a hypothetical situation. Billy has a day job earning $100,000 per year in California. He wants to build a real estate empire in his local market as the king of residential real estate (1-4 units). What value of real estate holdings would he need to have enough depreciation to offset $100,000 of gross income (assuming he does not buy commercial real estate)?

[Matt Devincenzo]

This would depend on the rent return etc...ignoring that for a second....

If he has 100K in W-2, and needs 100K in depreciation...then he needs 100K*27.5 years is 2.75 Million in improvements, or 3.925 (2.75M/70%) in asset value. Of course that increases by however much rental income is also being brought in and eating away at the depreciation already....

Obviously an over simplified response, but that's your answer.