I Am $750M In Debt & Pay NO Taxes —Here’s How
Ken McElroy Show
Ken McElroy
4.8 • 692 Ratings
🗓️ 11 March 2025
⏱️ 19 minutes
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Summary
Ken McElroy and tax advisor Eric Freeman break down how real estate investors legally use tax strategies like depreciation, leverage, and 1031 exchanges to reduce or eliminate taxes. They reveal how a $750 million debt strategy can generate wealth, optimize tax benefits, and help investors grow their portfolios while keeping more money in their pockets.
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Visit Ken's Bookstore: https://kenmcelroy.com/books
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ABOUT KEN: Ken is the author of the bestselling books The ABC’s of Real Estate Investing, The Advanced Guide to Real Estate Investing, and The ABC’s of Property Management. With over two decades of experience in real estate investing, Ken McElroy is passionate about sharing the good life by helping real estate investors grow and prosper. This podcast is a place for Ken to discuss numerous topics connected to real estate investing, including finance, budgeting, the entrepreneur mindset, and creating passive income. Ken offers a wealth of personal experiences, practical advice, success stories, and even some informative setbacks, all presented here to educate and inspire. Whether you’re a new or seasoned investor, the information and resources on this channel will set you on a path where you and your investments can thrive.
Ken's company: https://mccompanies.com
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Transcript
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| 0:00.0 | On today's show, Ken has on Eric Freeman, his tax advisor. |
| 0:08.8 | While I know tax isn't the most exciting topic, when you're investing in real estate, |
| 0:13.9 | it is something you really need to understand. |
| 0:16.3 | It's also one of the main benefits of investing in real estate, especially if you're a high |
| 0:20.8 | income earner. So pay attention and enjoy. I'm over $750 million in debt, and I pay no tax. |
| 0:31.8 | So I brought my tax advisor here to explain how. So Eric, how? You know, it also represents almost 10,000 apartments, |
| 0:41.3 | right? So let's let's talk to people on how legally I'm able to defer tax. You know, there's a lot there, |
| 0:49.3 | but I think the big point is one, the debt is on real assets, but not only is the debt on real assets, |
| 0:57.7 | they're on assets that the government favors, meaning that the government incentivizes you to |
| 1:04.4 | invest in them. So there are tons of tax breaks that are available to those that own real estate. And you can maximize |
| 1:14.3 | those with using leverage because you can essentially get tax benefits using other people's |
| 1:21.1 | money. So one of the big tax advantages that you get is what's called depreciation. When you purchase an asset, you get a |
| 1:30.2 | deduction every year for a portion of that purchase price, regardless of whether the value changes |
| 1:37.3 | or not. So even if the value goes up, you can still take these depreciation deductions every year. |
| 1:42.8 | So by adding in debt, you can actually increase these depreciation deductions every year. So by adding in debt, you can actually increase |
| 1:46.1 | these depreciation deductions, which is a great tool. This doesn't just apply to Ken. Anyone can |
| 1:51.7 | use this as long as you're checking all the boxes. I had a client that he had a lot of income |
| 1:57.2 | this last year in 2024, and he's a real estate professional also and he was asking me |
| 2:04.7 | what do I do and I said buy more real estate and so it's like what for depreciation is like yeah so we |
| 2:12.0 | literally backed into a number we said this is the taxable income you have right now in order to offset that, |
| 2:19.8 | you need that much in depreciation deductions. To get that much in the depreciation deductions, |
| 2:24.4 | it means you need to buy a property of at least X purchase price before the end of the year. |
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