The Dividends of Depreciation

Written by Lewis Fein Posted On Sunday, 07 August 2022 00:00

Like all markets, the real estate market fluctuates. 

Whether the housing market stagnates or construction stalls, whether inventory increases or prices fall, whether the economy is in a recession or a transition, real estate professionals must persevere. 

The ability to persevere depends, however, on the ability to persuade. 

The ability to gather and highlight evidence, so as to put things in context and explain things with evidence, is an asset. The ability to prove that depreciation is not a detriment, that depreciation of a specific asset yields dividends in the form of tax deductions, is a necessity. 

A real estate professional with these abilities is a credit to his industry, just as a real estate professional who does these things is a leader within her industry.

The larger point is that depreciation should not deter homebuyers. Not if real estate professionals speak to the tax benefits of this issue, citing or collaborating with CPAs in the process. 

To wit, Romeo Razi, CPA, says, “We all inherently understand that things get old and run down, but what does that mean for your real estate investment and keeping money away from the IRS?”

Understanding the nature of depreciation allows homebuyers to better understand—to appreciate—the nature of real estate investing and personal savings.

Understanding this fact, that the question Mr. Razi asks is not only important to one group but indispensable to all groups with a connection to real estate, is a fact real estate professionals must communicate to their respective clients.

Understand, too, that for every challenge the real estate market presents—for every event that looks like a challenge—an opportunity to succeed exists.

In this case, success begins with making the complex succinct.

Communication furthers success, provided real estate professionals take the time to educate clients about what matters most in this economy.

Where CPAs can improve communication, let them join the conversation.

Where CPAs can communicate the advantages of something, let them add to the conversation.

Where CPAs can best communicate something, let them lead the conversation.

Do not exclude CPAs and outside experts from any such conversation, because a real estate professional with the talent to communicate—a person with the confidence to invite others to communicate on his behalf—is a professional in every sense of the word.

The real estate industry needs to exemplify these points, now more than ever, because the economy may worsen or interest rates may continue to rise.

If real estate professionals can meet the challenges ahead, overcoming each challenge by addressing it directly—offering a direct answer to a direct question—the industry will adapt and deals will ensue; success will advance, thanks to the influence of facts and the power of communication.

This opportunity is relevant because it is real.

This opportunity requires repetition, meaning real estate professionals must repeat the facts regarding depreciation.

By communicating with clients, or by collaborating with clients and CPAs, real estate professionals can strengthen the economy.

Because of what real estate professionals do, we have it within ourselves to do likewise—to choose and achieve e excellence.

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