ilmscore | Prediction Details
"it makes more money in this case not to put anything down than it does to pay it off in full how well I'm probably going to lose a lot of people here when I get into nitty-gritty numbers so if you want to skip through this just go to this Tim stamp right here but if you want me to break it down it's seriously like magic Let's assume I make $24,000 as net rental income on a $200,000 investment with real estate you're then able to depreciate the cost of the structure over 272 years so at a $200,000 build cost that's $7372 a year that I could write off against any profits this means I only have to pay tax on $16,727 worth of income which at California's 45% tax rate means I'm paying $77527 subtract that from $224,000 worth of net rental income and that's a post tax investment return of $1,473 in the first year but wait in order to pay for that I'm able to borrow $200,000 at an interest rate of 5.26% which works out to be $10,527 write off against California sourced profits my actual interest paid after taxes is only $5786 on top of that since I'm able to keep my money invested in a money market fund earning 4.3% that's an extra $8,600 a year that I get to keep which after a 37% federal tax comes out to $5418 worth of profit so when you add it all up we have $16,493 worth of income from the property I pay $5786 worth of net interest I make $541 from the money market fund and that comes out to a total profit of $6,150 in the first year for nothing out of pocket if you compare that to what I would have made had I just paid off the property in full I'd have just $1,055"
By Graham Stephan | January 15, 2025 | Pending
From video
I'm Going Out Of Business (What Happened) 00:16:21 - 00:16:41
Interpreted Prediction
Financing a $200,000 ADU in California with a loan at 5.26% interest and keeping funds in a money market earning 4.3% results in a higher first-year profit ($6,150) compared to paying for the property outright ($1,055), due to opportunity cost and tax benefits.

Prediction Details

Topic
Real Estate Investment Strategy (Leveraged vs. Outright)

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