Video instructions and help with filling out and completing Where Form 4797 Amortization

Instructions and Help about Where Form 4797 Amortization

Kris krohn and we're back today with limitless wealth TV doing some advanced vocabulary some of you've been asking questions about amortization and depression I mean depreciation that can be a little depressing one of those two terms you're gonna have to figure out which ones we're gonna all break it down for you and help you understand what amateurs ation and depreciation really mean Music all right so for today's advanced real estate vocab we're talking about amateur ization versus depreciation now this is a really hot search for term and sometimes people confuse these two terms so what I wanted to do today is just break it down for you and get in the new grid ease of really what it is first of all let's just tackle what an amortization schedule is so if you buy a house with a 30-year mortgage you need to understand something it's not like you're paying a portion of interest and a portion of principle that is the same every month for 360 months or 30 years what the banks are doing instead is they're saying you know what we're the bank weren't charged let's play by the rules that we make and the rules that we make say that it should be mostly interest up front with a little bit going to principal and after years and years of paying on a mortgage we'll start letting less of it go to interest and more go to principal and by the way after 30 years by the time you've paid the house off you'll have you'll have paid a certain amount of interest and obviously enough principal to pay off the house so how much interest are you really being charged on average you're gonna pay for your house two and a half times over 30 years yeah so if you have a $300,000 house you're probably going to end up paying 750 thousand dollars for the house you're gonna pay a lot of money for that house because the banks have Amateur eyes dit on their amortization schedule to be in whose favor to be in their favor bottom line is they know that after five years people end up moving and so they don't want you to pay down you know an equivalent of a sixth of the house in five years over a 30-year period term what they actually want to do is make sure that majority that is going to interest so bottom line is when you do a 30-year loan the mortgage wins the bank wins they're gonna win on interest and remember they're gonna have you pay for it two and a half times so that's what an amortization schedule is depreciation is altogether something different a depreciation schedule really comes back to the tax benefits that you and I get as investors for how the government thanks us for being an investor's and they stimulate the economy by getting investors tax write-offs according to depreciation let me share with you what that means the depreciation rules have recently changed but off of the old rule for example you could take a home and depreciate it over 27 years so for example what that would mean is take a hundred thousand dollar house and take a hundred grand and divide it by twenty seven and you get right around three thousand dollars every year the bank will actually write off three thousand dollars of the house the next year three more thousand the next year three or more thousand the next year three more thousand so basically the depreciation creates a significant tax benefit in fact right now the tax rules have changed on this and you get to write off an even heavier percentage of the depreciation there is a catch-up period when you go to sell the house unless you're doing a 1031 exchange however and so to really break it down and make it really simple amortization is usually tied to interest and it's basically what amount and most amortization schedules will favor the bank with most your payment being interest now and then when you're near 27 the majority will be principal with only a little bit of interest banks are gonna take their money upfront depreciation is chopping up the house and basically saying you get to write off this house in chunks over time and how much chunk is it well it ends up being enough that for us investors this ends up ik waiting to some huge tax benefits so when we say a mature ization versus depreciation this one is in the bank's favor instead of yours and this one is in your favor especially with current tax law thanks for being here so we can break it down for you hope this is helping increase your massive knowledge bank if it is go ahead and like the video also subscribe and ring the bell this lets me know to send you daily notifications and the videos that we got coming up so we can keep deepening that real estate relationship and who knows maybe in time you and I will be partners out there doing real estate together if you're feeling like wait a second why aren't we doing that right now then hike on over to the website check it out we can start making that happen today Music