Appreciation on rental property

[Tommy Mckeown]

This is a very funny question u may think it’s stupid but why is appreciation so good on rental properties?? I know it’s safe if you have to sell your property your not under water. And u can pull Equity out of the property. But if you really want to sell it to make money off of it it gets taxed so hard it’s almost not worth it. I’m not saying I would not like appreciation on my home of course I would want it for safety and if I do want half the money if I sell it. But I just don’t get it when people say they have 10 houses and it’s over $1 million of net worth and they said they are a millionaire. Can you please correct me thanks!

[Joe Splitrock]

Originally posted by @Tommy Mckeown:

This is a very funny question u may think it’s stupid but why is appreciation so good on rental properties?? I know it’s safe if you have to sell your property your not under water. And u can pull Equity out of the property. But if you really want to sell it to make money off of it it gets taxed so hard it’s almost not worth it. I’m not saying I would not like appreciation on my home of course I would want it for safety and if I do want half the money if I sell it. But I just don’t get it when people say they have 10 houses and it’s over $1 million of net worth and they said they are a millionaire. Can you please correct me thanks!

 I hear what you are saying, but even if taxes are 50% of your gain, it is still better than having no gain. In order for it to be "not worth it", the taxes would need to be higher than the gain. That is not how it works. I am sure you could easily sell your house for what you paid to avoid the taxes. You will have many buyers ready with cash to make that happen. That is not in your best interest, but you avoid taxes.

As far as the second question "10 houses and it's over $1 million of net worth and they say they are a millionaire", by definition if your net worth is over $1 million, then yes you are a millionaire. If your net worth is over $2 million, you are a multimillionaire. Being a millionaire isn't really a big deal, because it doesn't have the buying power it had 50 or 100 years ago. Back in 1960 if you had a college degree, average starting salary was $6000. Today McDonalds in my city hires burger flippers for $30,000 per year and you can get a start job at twice that with a college degree. My point is $1 million was a lot in 1960, but not so much today.