mino2126_IHB
New member
Wouldn't a capital gain be a profit of 1 dollars and capital gains be a profit greater than a dollar?
Life of a Landlord
- Thread starter blackacre-seeker_IHB
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lawyerliz_IHB
New member
<p>Hahahaha.</p>
<p>Perhaps a capital gain would be a gain for just one deal, gains for several.</p>
<p>Nobody's gonna make any anyway.</p>
<p>Perhaps a capital gain would be a gain for just one deal, gains for several.</p>
<p>Nobody's gonna make any anyway.</p>
no_vaseline_IHB
New member
Either way, I think you kids get my point.
<p>Blackacre,</p>
<p>A CD earning 5.5% isn't really earning 5.5% if you take into account income taxes and inflation. On the other hand, a rental property is an appreciating asset (if you look at history over the last 30 yrs) that the government allows you to write off it's <u>depreciation</u> as well as the ability to defer the tax on the gain indefinitely (1031 exchange). I would take Ninja's 3.8% over a 5.5% CD any day. The key is to find property with positive cash flow like Graph mentioned. The best way to start would be to buy a 4-plex and live in one, while renting the other 3. Not only are you able to write off your mortgage interest, you are also able to write off the depreciation of the building, as well as all cost of maintenance vs. the income you are receiving. I would recommend a 4 unit property because this is where you get the most bang for your buck without it being labelled a "commercial" property which would then cost you more in terms of financing and the government doesn't allow you to depreciate it as fast. More people have made their fortune this way than with the stock market, or flipping houses. Sure it takes more work, and we are talking a longer time frame, but it is in my estimation the best way to "invest" in real estate.</p>
<p>A CD earning 5.5% isn't really earning 5.5% if you take into account income taxes and inflation. On the other hand, a rental property is an appreciating asset (if you look at history over the last 30 yrs) that the government allows you to write off it's <u>depreciation</u> as well as the ability to defer the tax on the gain indefinitely (1031 exchange). I would take Ninja's 3.8% over a 5.5% CD any day. The key is to find property with positive cash flow like Graph mentioned. The best way to start would be to buy a 4-plex and live in one, while renting the other 3. Not only are you able to write off your mortgage interest, you are also able to write off the depreciation of the building, as well as all cost of maintenance vs. the income you are receiving. I would recommend a 4 unit property because this is where you get the most bang for your buck without it being labelled a "commercial" property which would then cost you more in terms of financing and the government doesn't allow you to depreciate it as fast. More people have made their fortune this way than with the stock market, or flipping houses. Sure it takes more work, and we are talking a longer time frame, but it is in my estimation the best way to "invest" in real estate.</p>
blackacre-seeker_IHB
New member
<p>penn1: thanks, it's a great idea. I haven't thought of the mortgage aspect. You are right, if you live in the same house, you can claim it as your primary residence and take advantage of the interest deduction. The downside would be living too close to your tenants of course... something I have to think about more.</p>
<p>I looked at some properties, and here is one on Lido Isle I liked (but way out of my price range). But in theory, what do you think of that? </p>
<p><a href="http://redfin.com/stingray/do/printable-listing?listing-id=498699">http://redfin.com/stingray/do/printable-listing?listing-id=498699</a></p>
<p> </p>
<p>edited: just noticed that this property is also a good illustration of falling prices, it was sold for 2.2Mil in 2005 and now back on the market for 2.29Mil</p>
<p> </p>
<p>I looked at some properties, and here is one on Lido Isle I liked (but way out of my price range). But in theory, what do you think of that? </p>
<p><a href="http://redfin.com/stingray/do/printable-listing?listing-id=498699">http://redfin.com/stingray/do/printable-listing?listing-id=498699</a></p>
<p> </p>
<p>edited: just noticed that this property is also a good illustration of falling prices, it was sold for 2.2Mil in 2005 and now back on the market for 2.29Mil</p>
<p> </p>
socalhousingbubble_IHB
New member
<p>Figures that the grammar police would drive a Dodge Intrepid.</p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
biscuitninja_IHB
New member
<p>(please excuse the bad grammar, I really hurt my finger pretty badly...)</p>
<p>The depreciation is where you can make alot of gains back... (not huge, but we're not talking about a few dollars here). I don't want to live with my neighbors, but I can if I use a property manager. Anyways good luck...</p>
<p>-bix</p>
<p>The depreciation is where you can make alot of gains back... (not huge, but we're not talking about a few dollars here). I don't want to live with my neighbors, but I can if I use a property manager. Anyways good luck...</p>
<p>-bix</p>
blackacre-seeker_IHB
New member
I don't get it, you mean I would need to purchase another investment property right-away to avoid paying that tax? thanks!
awgee_IHB
New member
seeker - If you sell business property for which depreciation is allowable, you must pay tax on the recaptured depreciation if you sell for more than the residual amount. Generally speaking, the residual amount is your basis minus the allowable depreciation.<p>
And the really funky part ... you must pay tax on the recaptured depreciation on the allowable depreciation amount whether you claimed the depreciation deduction or not. Ouch! So, be darn sure to take your allowed depreciation deduction on business property that you may sell later.
And the really funky part ... you must pay tax on the recaptured depreciation on the allowable depreciation amount whether you claimed the depreciation deduction or not. Ouch! So, be darn sure to take your allowed depreciation deduction on business property that you may sell later.
lawyerliz_IHB
New member
<p>If you do the 1033 exchange thing until you die, you never need to pay any taxes, because your heirs get a stepped up basis when you die. Of course, you will be dead. . . . .</p>
<p>There are rules one must follow to do this properly and companies who do nothing but exchanges, for a reasonable fee.</p>
<p>There are rules one must follow to do this properly and companies who do nothing but exchanges, for a reasonable fee.</p>
biscuitninja_IHB
New member
<p>Liz, </p>
<p> That's when things get sticky.... Once you decide to sell everything and get hit with ALOT of taxes (and are still among the living...). Still i'd be happy to pull out what money I do have and then scrap a few dollars once all the paperwork settles. I am both laughing and crying about your reasonable fees...</p>
<p>have a good one</p>
<p>-bix</p>
<p> That's when things get sticky.... Once you decide to sell everything and get hit with ALOT of taxes (and are still among the living...). Still i'd be happy to pull out what money I do have and then scrap a few dollars once all the paperwork settles. I am both laughing and crying about your reasonable fees...</p>
<p>have a good one</p>
<p>-bix</p>
lawyerliz_IHB
New member
Well, they seemed reasonable to me. This was just for one deal tho. If you have lots, I supposed it adds up.
flmgrip_IHB
New member
biscuitninja , "I don't want to live with my neighbors"
hehe... i don't see a way around that...
hehe... i don't see a way around that...
biscuitninja_IHB
New member
<p>Flm, buy a big apartment complex and make it for yourself.... No renters. BUT that's why you need multiple apartments to support that one big one. Anyways good luck</p>
<p>-bix</p>
<p>-bix</p>
Anonymous_IHB
New member
<p>Re "buy a big apartment complex and make it for yourself"</p>
<p>Sounds like Cartman's amusement park ...</p>
<p>http://en.wikipedia.org/wiki/Cartmanland</p>
<p>Sounds like Cartman's amusement park ...</p>
<p>http://en.wikipedia.org/wiki/Cartmanland</p>
irvinefsbo_IHB
New member
blackacre-seeker:
The Apartment owners association has great articles about being a landlord and its pitfalls.
http://www.aoausa.com/Articles_Archive.htm
Check out the series on Mitochondria learns to Invest which starts in Sept 2005 issue. The series walk you thru a fictional investor who starts with nothing but credit card debt and eventually winds up with 4 income properties and financial independence.
The Apartment owners association has great articles about being a landlord and its pitfalls.
http://www.aoausa.com/Articles_Archive.htm
Check out the series on Mitochondria learns to Invest which starts in Sept 2005 issue. The series walk you thru a fictional investor who starts with nothing but credit card debt and eventually winds up with 4 income properties and financial independence.
EvaLSeraphim_IHB
New member
<a href="http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/04/27/MN0R10CDQC.DTL">Here</a> is an interesting story about one landlord who went too far.