What does it mean to run a property at a loss for purposes?

[Jacky Johnson]

I meant at a loss for tax purposes. Yes, what does that mean? And is it ok to do so? Why or why not?

[Randall Alan]

When we first get into a property we often have to do some renovations to get it up to speed to rent.  By the time you take your rents as your income, less all your expenses and depreciation, it is totally possible to have a loss on your property.  It's truly just a sum of its parts.  It doesn't even mean you didn't have a net positive cash flow on your property.  If you have multiple properties your loss on one will help offset gains on another.  

We have 40 units and between all of them, on paper (from an IRS perspective) we were able to write off all but $9,000 from just under $400,000 in rents.  3/4 of the properties are financed, so lots of mortgages, insurance, property taxes, etc to write off.  Any legitimate business expense counts to reduce your taxable income, cars, phones, health insurance, professional services, even business meals count at 50%.  Depreciation is along the lines of 3% of the value of your properties... at $2,000,000 in value, that's $60k right there!  Find a good tax accountant and they will work their magic!