Keep it to yourself!

I'm no tax expert, and I strongly suggest you get one.  Just the other day my CPA shared a golden nugget of info with me regarding investment property income.  Are you sitting down?

Investment property income is not taxable by FICA and Medicare.  How much money can that save the average investor?  A lot!

Imagine owning three properties before you've retired.  You collect, oh let's say....$8,250/month and the buildings are paid for.  Your rental income (assuming no expenses, depreciation, etc.) is $100k/year.  And you'll likely pay $15,000 or more in taxes on that income.  That's right, $15,000.

Now take that $15,000 every year and put it in a very, very modest return of 5% and compound it annually.  Guess what!  In 10 years that money is worth $222,535.23.  (I didn't even account for the likelihood of rents going up over time, or that you might make an investment with a much better return.)

And guess what else!  When you retire, all that money is sitting in YOUR account and is STILL growing.  That's right, you're retired and your money is still growing, rather than getting chipped away and devalued year after year. 

And this is why i get so excited about people who insist that rental property cash flows from day one.  They forget about appreciation, depreciation, deductions, other tax benefits, and even the 1031 IRS Tax Deferred Exchange benefits.  All in all, owning rental property is a very good thing over time.