My Wealth Building Strategies-Personal Investment Update

My First Real Estate investment:

Four Family Apartment in St. Louis Missouri


photo-14I Fell prey in 2005 to the real estate craze with this purchase.  Hindsight tells me that I made this purchase as we were cresting the height of the market, so it has been a struggle to turn it into an asset rather than a huge liability.  This was in rather poor shape in 2005, it needed serious tuckpointing, had wiring and roofing issues, and just was not very aesthetically pleasing.  All this has been completed, along with new windows and complete renovations of 3 of the units.  Now this is an asset, at least when it is full and everyone pays on time (this is the biggest struggle.)  Rents are $535 each and there are 4 units, bringing in a gross monthly income stream of $2140.  My mortgage is $1235.  There are many benefits to owning this, but it is not without some downsides.  Here are some of the benefits I have enjoyed over the years:

Positive Cash Flow!

The cash flow is great, but as I said, there are some months where chasing down rent are a necessity.  There are 2 tenants who pay on time every time.  There is one who pays on time roughly 80% of the time and the other, well, I am lucky to get her “full” payment 65% of the time.  The issue with her is that she never complains (probably because she doesn’t want any attention to herself .)  She is clean, quite and doesn’t cause issue with the other tenants.  I figure these qualities are worth something, plus when she does pay, she includes all accumulated late fees as well.

House Price Appreciation

At this point, there is very little appreciation.  Most of my price appreciation comes from paying down the mortgage (I am using some of the cashflow to make bigger payments) so at this point, my interest payments which are 3.75% are palatable.  The beauty is my tenants are paying my mortgage, yes I have to manage everything, but the payoff will actually come from my tenants, this is wealth building 101!

Tax Benefits of Home Ownership

Depreciation allows me to deduct the cost of my buildings and the substantial improvements I have made to it, over a specified period of time. My building can be depreciated over 27.5 years.  This is figured by dividing the cost paid, which was $206,000 in 2005, by 27.5 and then subtracting the resulting sum $7490 from the property’s income each of the 27.5 years.  This helps lower my tax burden.

Real Estate Tax Deductions

Throughout the years I have done a considerable amount of renovations and improvements, such as tuckpointing, new roof, improvements to the units, built a retaining wall, etc, etc, etc.  These improvements cost me at the time, so I did have to have the cash to pay for them when they happened.  The beauty at tax time was, whatever the cost of each improvement was, directly offset my taxable income.  For instance, the roof which cost $2000 at the time, allowed me to deduct that amount from my gross income.  So, what all the deductions do is essentially lower your gross taxable income.  For example, if I made $100,000 and paid a 35% tax rate on that $100,000 my tax would be $35,000.  Using my deductions, if I made that same $100,000, but I had $15,000 in real estate deductions, then my gross taxable income is $85,000 which means I paid taxes on this amount of income rather than the $100,000.  So as you can see rental properties are a wonderful way to lower your tax burden.  At a time when taxes look to be going up, acquiring real estate as a hedge, would be a great investment in my opinion.


Are you thinking of going in for a personal investment?

Join our newsletter

If you like Critical Financial, subscribe and get our latest content via email.

Powered by ConvertKit

Share this post:

Recent Posts

Leave a Comment


May the 4th Be with You: Star Wars Swag on Amazon

May the 4th Be With You: Star Wars Day Swag

It began as the punniest holiday ever but quickly grew into an earnest (if somewhat random) celebration of the long-running (and still... more →
People count the money to buy a house in future success.

Avoiding Mortgage Scams: Don’t Fall for Unreasonable Promises

If it sounds too good to be true, it probably is. That’s sound advice for almost all aspects of life, including the search for... more →
Eat for free for a whole month via the meal kit companies discounts for new customers.

How To Get a Month of Free Food: 9 Meal Kit Companies Offering Discounts to New Customers

Play your cards right and you might be able to line up a month’s worth of free meals if you were to try out all nine of the meal... more →
Generate extra cashflow -- here are 97 ways.

96 Awesome Ways to Generate Extra Cashflow

Who doesn’t want more money nowadays? We’ve got you covered on that front. Here comes a long list of different ideas on... more →
Valentine's Day gifts that won't destroy your budget

Valentine’s Day Crafts Are Romantic Rescue from Crazy Inflation

Fall for the hype this week and you’re out an average of $143.56 for Valentine’s Day. Crafts and other do-it-yourself tactics... more →

Ultimate Guide to Bitcoin — FREE Ebook!

Have we got something for you: a free ebook about bitcoin! more →
Get a flu vaccine.

Why You Need To Get a Flu Vaccine Right Now

Flu vaccines aren’t just for the elderly  anymore. Here are 25 reasons you should go get vaccinated. more →
Financially successful

Acquire the Trait All Financially Successful People Have

Financially successful people tend to all have a lot of self-discipline. Improving your discipline in one area of your life often spills... more →

What’s the Best Free Recipe App?

The Apple Store and Google Play together offer more digital cookbooks than you probably have room for on your mobile device. So which... more →
New tax law might slow down housing market.

What Will the New Tax Law Do to the Housing Market?

The new tax law will have a profound impact on the housing market, although in ways that go beyond the deductibility of mortgage interest... more →

4 in 5 Households Will Get a Tax Cut in 2018

Four out of five U.S. households will get a tax cut as a result of the legislation that President Donald Trump signed into law today. more →
Will bitcoin reach $100,000?

When Will Bitcoin Reach $100,000?

Bitcoin has accelerated its pace of appreciation in recent months, and if the current levels between $15,000 and $19,000 make you itch... more →
The Dow Jones topped 24,000 -- now what?

The Dow Jones Crossed the 24,000 Threshold. Now What?

Stocks appear to be increasing in volatility, yet the markets closed on Monday, December 4 with the Dow Jones Industrial Average is... more →
Peer mortgage

Should You Get a Peer-to-Peer Mortgage?

If you can’t get approved for a home loan from a bank, you might want to look into applying for a peer-to-peer mortgage. more →
Investment gifting is awesome.

4 Things To Know Before You Donate an Investment

While donations of any kind are appreciated, gifting investments benefits both the giver and the receiver. Here are four key things... more →
Are you wondering: What's the Relationship Between the Stock Market and Federal Debt?

What’s the Relationship Between the Stock Market and Federal Debt?

Wouldn’t it be wonderful if gains in the stock market could actually reduce U.S. government indebtedness? If that were true,... more →
travel tips, save money on travel, cheap travels

How to Save Money While Traveling Domestically

I know a person who traveled just 150 miles away and spent $500 for the weekend. That amount of money is a massive amount of money... more →