Why Invest Into Rental Properties

By Jason Watson, CPA
Posted Sunday, August 31, 2025

There isn’t a good place for this, and we toss around these concepts in various places in our book. There are two reasons to invest into rental properties-

• Build Wealth, and
• Lifestyle Choice

We do not buy real estate and rental properties for the tax deduction- that is silly. The tax deduction tail does not wag the wealth-building dog. If we can do both, then swell, but the primary objective in life is to die with the most toys, right? Sure, a big tax deduction from a big accelerated depreciation deduction from a big cost seg study can be redeployed into building more wealth. Got it.

However, the minute you flip the narrative, and chase tax deductions, you will make a bad decision along the way. 100% guaranteed, or as the young kids say, “hundred.” That shiny new short-term rental will still be yours long after you reduce your high W-2 income in year 1. Make sure it is a good choice- can it rent? Can it rent for what you want? Is it going to be a nightmare to manage?

Another consideration is lifestyle choices. Do you buy a rental property today that is not as operationally lucrative so that in 20 years you can kick out the tenants or take it offline, and make it your second home? Sure. Solid strategy! Emotional purchases are not bad- not everything has to add up or have an ROI or IRR that blows your hair back. Just think about a nice sports car or luxury sedan- they don’t make sense financially, yet they seem to sell often. It is permitted, perhaps encouraged, to feed your non-financial appetite along the way to building wealth with real estate and rental properties. You can have both!