Depreciation, W2, and multi-family

[Ryan G.]

Hey community,

I'm sorry if this is a broad/dumb question.

I have a couple of SFHs and have been slowly growing my empire. My plan was to do a low leverage/safe strategy, and pay off the handful of SFHs in a few years with my large W2 income, and decide at that point what I wanted my long term strategy to be.

However, I'm suddenly in a financial position where my W2 income has skyrocketed even more, and I've moved into  the 30%+ income tax bracket. My depreciation on the couple of homes is only around $10k a year offset for my income. I'm trying to decide how/if I should jump to a much larger real estate vehicle(ex a small apartment complex) where the depreciation would perhaps offset a much larger amount of my income.

Current challenge: I only have around $50k cash on hand. I suppose I could save like there's no tomorrow, and muster around $200k within the next year or two. 

Question: Is getting into an apartment complex feasible? Will the depreciation significantly help my W2 income? I've bought and sold around 5 SFHs but have only read about multi-family. 

[Andrew Freed]

@Ryan G. - I'm in a similar boat where I have a strong W2 and own a good amount of real estate. The issue is, when you have a strong W2, your limited with how much losses you can write off against real estate. It's because it's considered passive income and you can't write that off against active income aka your W2. However, the holy grail of real estate investing is obtaining the real estate professional designation where you can write off real estate losses directly against your active income. Unfortunately you and I don't have that benefit unless we become full time real estate professionals so we are limited with how much those losses affect us. They also have a short term rental loophole which allows you to write off short term rental depreciation against your W2, which might be something to consider.