Question: Wow, I’m really not following you around, Joe, but now I’m curious. Would > a multi-unit be depreciated for 27.5 years like a house or for 39 years > like a commercial property? I’d been wondering about this for a while.
> Hope you don’t mind the questions.
> Bob
> On Mon, 15 Aug 2004, Joe Garcia wrote:
> > If you mean, to rent them, I don’t think there are any… please > > someone correct me if I’m wrong, but I believe a multi-unit is > > depreciated and works exactly the same as if you owned a house.
Answer: My understanding is as follows… it is possible that this only applies to California, but here it is:
Up to 4 units, the property is treated the same as a house. You can get home owners insurance on it, you can get a conventional home loan, you can even get a home warranty from a regular home warranty company! I have seen where 4-unit buildings are depreciated over 27.5 years, but I’m not 100% sure if this applies to all 4-unit buildings.
Once you get past 5 units, then things change… you have to use a commercial loan, which typically requires a bigger down, more interest, and shorter amortization… commercial insurance which is more expensive… and I’m not really sure how you depreciate it, but my guess would be that it would have new rules like everything else.
Anyways, I guess I could have probably looked it up on-line in 2 minutes, but that would just make too much sense… I guess the bottom line is:
Stay under 4-units per building. The best set ups are when you can buy multiple 4-plexes on separate lots, because you can treat them like houses.
Joe
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