tax implications from small apartments

[Daniel Warren]

a local deal popped up in my hometown for an 8 unit apartment. works out to a 15.6% cap rate. has 4 2br/1 and 41br/1 and rents are 400/300. 3 empty atm but he says he has calls all the time and stays full most of the time. he is selling do to a critically ill grandchild he wants to spend more time with. no way i can come up with the 20% down on this, and i would love to get my mom into this deal. she is super hard headed about securing her future and im trying to get her into some real estate for when she is ready to walk away from her job. i almost have her sold on it and her main concern i cant get her to move past is the tax implications. she is a managing partner in a sonic drive in. she makes 20% providing she makes a certain profit %, plus a small salary, plus they let her buy in 25%. she is afraid of this putting her into another tax bracket. i told her to talk it over with her cpa, and i just wanted to run by the community here to see what answer you guys had as well. she is a money hoarder and im trying to get her into this for when she walks away she will have something. they will buy her out at 75k when dhe leaves and she thinks thats gonna be good enough. she does no 401k or ira or anything so i am trying to talk her into this for some passive income when she retires. help me sell her on the taxes please!!

[David Beard]

@Daniel Warren - because of depreciation writeoffs, owning rental real estate is one of the most tax effective ways to invest. I doubt she would move into a higher tax bracket, but you haven't posted enough numbers to say. Besides, moving into a higher marginal tax bracket is normally a sign of success! (bearing in mind that we always want to pay as little as we legally can). I'm not sure your mom understands that tax brackets only impact "marginally", meaning that only the new dollars earned are possibly taxed at a higher percentage, not her existing income.