Basic Tax Question

Because they will write off every single expense they possibly can through the business. BUT the biggest reason is that you get to write off depreciation and interest so typically this will end up having the property show a net loss on the p&l/tax return.

A net loss with a business then lowers their personal tax liability (ie they make $200k in their job, property shows a net loss of $50k, they are only getting taxed on $150k income).

Look up depreciation on commercial. It’s your best friend.

The real answer is that with depreciation and expenses, he can likely have a taxable loss each year on the property, although there are rules that potentially limit how much of that loss he can take against other income.

The reality is a lot of people buy these and rent them out some but also use them personally and basically try to push through 100 percent of the expenses as a rental expense, even though they would get slammed on audit.