Housing Euphoria

[Jil]

@hanera

@marcus335

Housing depreciation is a joke though. The whole point is for a business to recognize the expense over the life of the asset instead of immediately. Most businesses depreciate assets to zero over the useful life, because at the end they will scrap it. Are you going to scrap a home after 27.5 years? Odds are it’s actually worth more money not less.

Don’t think an un-maintained structure would worth more after 27.5 years. We can’t depreciate land right?

@marcus335

Maintenance is deducted in the year the money is spent. You do get to deduct that cost. Deducting the depreciation of the building on top of that is crazy.

Note this clause:IRS makes a depreciation (virtual or estimate deduction) recapture when we sell it as they have given maintenance deduction (actual) !

[Jil]

@hanera

@marcus335

Ok, you’re talking about replacement of items. I was thinking the lawn upkeep, gutter cleaning, etc. It’s still crazy that the IRS allows people to depreciate an appreciating asset. They’ll claim that back when the home is sold unless a 1031 exchange is done. That’s crazy powerful when you combine the depreciation with 1031 exchange. Add in that you can cash out refinance and deduct the interest. It’s pretty amazing.

IMHO, the culprit is 1031 not depreciation.
Cash out refinance is phony too.

Cash out refinance is phony too. => Oh, no ! This only gives me money for the next home !

[hanera]

@Jil

Cash out refinance is phony too. => Oh, no ! This only gives me money for the next home !

That’s why is phony You can buy many houses as prices appreciate and leverage yourself crazy… Is ok so long nothing would cause a domino. Build wealth quickly in good times, guess going forward won’t have any bad times Thought the original purpose is to allow owner to upgrade the house to be more livable not buy a new house

[marcus335]

That’s why some countries don’t allow cash out refinance or home equity loans. It also forces people to be more responsible and save. Leverage is great when prices are increasing. It’s deadly when prices decrease, and prices don’t increase forever.