Mortgage and Depreciation Expense and Tax Analysis

Review Chapter 4 of the textbook to give you ideas on how to work on this assignment.
Prepare a two- to three -page paper (excluding the title and references pages) explaining and comparing the four different scenarios on how mortgage, depreciation, and tax expenses impact decisions on whether or not to purchase a single family income property as an investor.
Scenario 1: If the mortgage rate rises from 5% to 10%, yet the appreciation of houses that consumers buy rises from 2% to 9%, would you be more likely or less likely to buy a house as an investor?
Scenario 2: If interest were able to be deducted from income, how would that influence your decision in Scenario 1?
Scenario 3: In the case of Scenario 2, if taxes on the property were fully deductible from income earned, how would this influence your decision from Scenario 1?
Scenario 4: How do depreciation costs on the house that are deducted from income influence the decision on Scenario 1 during an inflationary or deflationary economy?

Sample Solution