Depression: accelerate, normal or slow

[Yacine Bouabba]

Which strategy do experienced real estate investors choose when it comes to depreciation? Accelerate, normal or slow depreciation? Is it worth going with accelerate depreciation when you're planning to sell in 10 years (maybe do 1031 exchange)?

[Dave Foster]

@Yacine Bouabba, There's a bigger question that investors ignore too often. And that is "how much of that depreciation will I get each year?" Just because you do a cost segregation and accelerate your depreciation does not mean you get to take all of it on your taxes. Your status as a real estate professional, the type of property, and your income limits will have an impact on that.

The sweet nectar is when investors know how to take advantage of depreciation and the 1031 exchange. Investors will utilize both to offset their income, but also structure a long-term wealth-building portfolio using the 1031 exchange. In fact, many people dont know about this, but you can actually 1031 into oil and gas rights, which would allow you to continue to indefinitely defer depreciation recapture and tax on profit. With the right strategy, there is a way you can position your portfolio for retirement and indefinitely defer the tax to one day pass down to your heirs at a stepped-up basis. Then you don't worry about depreciation recapture. The 1031 and death will take care of that!