Not only do those so-called gurus oversimplify matters, but they almost invariably leave out important points that differentiate a primary residence from an investment property. So many people get into the investment properties “game” without fully understanding the rules.

For example, people are led to believe that property depreciation expense will shelter some or all positive cash flow from income taxes; while this is true, the sheltered income must be repaid back by “depreciation recapture” when the property is sold. (This does not apply when the property is “exchanged” via a 1031 exchange or passed to beneficiaries after death of owner.) In addition, unlike primary residences, capital gain from selling an investment property does not receive tax-free benefits.

Too often people get into this “game” without understanding the rules!