surveyor is correct. You can deduct up to 25K of losses from real estate against regular income, up to income limits. Starts phasing out at 100K and completely phases out at 150K. Different rules apply for real estate professionals. These losses may be carried forward to future years and may be used against passive income (no limit) or against regular income up to the limits described above. Also, they may be used when the property is sold.
If you exceed these income limits … After owning rentals for a number of years, it is pretty easy to build up 10’s of thousands of dollars in carryover losses, even on properties that break even after taxes due to the depreciation. These losses you build up in early years of ownership translate into tax free cash in later years as you either pay off the loan or rents increase. If you think tax rates will be higher 20 years from now, carryover losses may not be a bad thing.
One other aspect you should get familiar with is loan eligibility and requirements. This is changing and likely to revert back to the more conservative end, particularly for better rates. Lenders have typically included 75% of the gross rental income when computing debt-to-income ratios. Also, down payment requirements for the best rates are likely to be in the 20-30% range.
