“Depreciation is good, but has to be recaptured eventually. You can defer it for a very long time by trading up using 1031 exchanges, but IMO that is a bonus to buying rental property, and should not be part of the equation.”

Given their situation, both working and making over 150k a year I would agree.

I would like to add that; if your adjusted gross income is under $100,000, you can offset up to $25,000 of your ordinary income from “losses” in real estate (depreciation, operating expenses and interest on the loan). These “losses” are an awesome tax shelter that essentially leaves more money to invest and further build your portfolio.

Yes, depreciation has to be eventually recaptured, but factoring in the time value of money, you will be using this to further increase your return (before it’s recaptured). Also, once finally recaptured you could have put yourself in a lower tax bracket and get taxed much less.

So essentially, I don’t see depreciation as a bonus. I see it has a major wealth building tool when combined with proper leverage and property selection.