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# The benefits of buying
- URL: https://www.smdp.com/the-benefits-of-buying/
- Published: 2008-06-18T15:00:00.000Z
- Updated: 2026-10-25T00:16:29.000Z
- Author: Guest Author
- Tags: Opinion, Santa Monica, #archive-import

*By Mike Heayn Real Estate 101*

URSULA K LEGUIN WROTE, “IT IS GOOD to have an end to journey toward; but it is the journey that matters, in the end.” If you live in Southern California and own real estate you are probably wondering when the crazy real estate journey will end. “Up up and away” to “how low can it go” has been the real estate measurement over the last seven years.

However, with all the negative real estate news coming out on a daily basis, I think it is important to point out three positive aspects of real estate: asset tangibility, tax deduction and income stream.

Investorwords.com defines tangible assets as “Assets having a physical existence, such as cash, equipment, and real estate,” as opposed to intangible assets such as stocks and bonds.

On a basic level, real estate can be profitable regardless of value, as long as income is being produced.

This can be beneficial in a situation where you have a property that produces a strong income stream, but due to variables such as location, values are depressed.

Real estate is great as a tax shelter. First, real estate property taxes are deductible. If you own a home, you can deduct the interest up to $1,000,000.

You can also deduct interest on home equity loans up to $100,000\. Of course, there are limits and rules to work within, but using real estate deductions just makes sense.

One of the tax benefits to investment properties is depreciation. Basically depreciation is just a paper loss.

Once an investment property is purchased, the investor can write off or deduct a set amount of the property’s cost basis.

The beauty of the depreciation is that the clock starts again when the next investor purchases the property.

Any investor will tell you that a good investment property is worth its weight in gold. If you think about it, real estate is amazing.

For example, an investment property is purchased for $1,000,000 with the seller carrying back 90% (or $900,000) at a 5% interest only rate.

The investor comes out of pocket $100,000 for the down payment. After expenses and debt service — mortgage payment — the property cash flows $2,000 a month.

Annually that is $24,000 a year. After a little over four years, the initial investment is recovered.

After that, the property simply produces income and is a cash cow. Deals like this exist — one of my clients came across this deal six months ago.

Real estate is unlike many other investments because it is a tangible asset.

Even in the worst of times with declining values, real estate is an asset that cannot be produced or made — it can only be bought.

With the many legal tax benefits, it is hard to imagine why more people do not invest in real estate.

However, it is important to understand what you are doing before investing, as an inexperienced investor can bankrupt themselves quickly.

MIKE HEAYN is a Washington Mutual multi-family loan consultant. He (310) 428-1342, or

*Originally published in the Santa Monica Daily Press print edition on June 18, 2008.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/061808.pdf?ref=smdp.com)