I will be doing my first tax return with rental property. Here is a typical example in my area:
Purchase price: 500k
Land value: 200k
Monthly depreciation: ((500k-200k)/(27.5x12)=0.91k
Monthly rent: 3k
It would be hard to come up with another $2.1k depreciation for this one house each month to offset the difference. A $400k (80% of purchase price) 30yr loan at 4% has a monthly interest cost of ~$600. Other costs that I can think of are: property tax $400/month, monthly HOA ~$100, monthly insurance ~$100, mothly repair/landscape ~$100 ...what else can we come up with? There is still has a $0.8k/month difference. The only thing that I can see that can be manipulated is the land value or the house value, even that would not be enough though.
If one is lucky enough and the purchase price would be only $300k when the 1% rule is followed and the room for "manipulation" will be even more limited. That's why I feel it is hard to achieve a "loss" unless the cost base is significantly increased.
Am I wrong?
