This is an incredible thread.
That said, I am not sure if anyone took into account the fact that you would need those tax advantages (well, maybe "all cash" did considering his gpa and years of experience ( :D , hope we can all enjoy the little bit sarcasm)).
Nevertheless, it may still be adviseable to dump the properties and get into something else that cash flows better because almost any property you get into will give you "tax advantages".
Just one man's opinion... anyone, please feel free to correct me if I'm wrong.
When you can't find a way, make a way!
As I've stated on other threads, and may have stated above in this post, tax "advantages" are an ILLUSION. The way you "save" taxes is by LOSING MONEY. At a 25% tax rate you pay (take your pick) interest, repairs, management or any other expense ONE DOLLAR in order to "save" TWENTY FIVE CENTS on taxes. That's bad math.
I know, I know, there are "passive losses" too. Except those are still "losses" caused by depreciation, WHICH HAS TO BE RECAPTURED, when you sell.
Repeat after me, LOSSES ARE BAD, even tax losses.
I would be shocked if there were a single property in all of DC or Boston that meets the investing model of gross rent income x 100 = purchase price. I would be surprised if you could find one that x 300 meets purchase price. Does that mean there are no good rental investments on the East Coast? Maybe so. But I wonder if that isn't a metric that works in Ohio and Texas, but isn't the best one to use for other parts of the country.
Detchu, about getting your taxes back. Please remember that you didn't MAKE any money there, you just overpaid the IRS. Getting money back is no deal. It would be better to owe $12,000 in taxes because you made $255,000 next year instead of making $155,000 and getting $12,000 back! All properties provide tax benefits. Reducing your taxes by $100 through rental loss only saves you +$28 in tax benefit (@28% tax rate). But, increasing your rental gains by $100 nets you +$72...which is better than $28. Better to make more money.
My thoughts on dumping the properties...do you invest as a full time profession? Can you absorb the rental losses and cash flows? Do you have reason to believe these properties will appreciate soon? Real estate is traditionally a long term investment and if you don't need to free up cash for more deals (b/c you're not doing this full time), and you're able to absorb the cash flows, then you should run the Internal Rate of Return and Return on Investment ratios. If they return better than doing stocks, mutual funds, or your other options, it might be worth it to keep the properties around for a while. :whistle:
Originally posted by "takleberry":
I would be shocked if there were a single property in all of DC or Boston that meets the investing model of gross rent income x 100 = purchase price. I would be surprised if you could find one that x 300 meets purchase price. Does that mean there are no good rental investments on the East Coast? Maybe so.
I was thinking the same sort of thing. I was looking at a duplex here in Madison WI. I had a verbal deal with the seller to buy it for $260,000. One side rented for $1100, the other side for $900. According to the 100 x rule it's only worth $200,000. ...but yet I acted to slow and somebody bought it out from under me at $280,000. It appraised for $320,000. In my opinion if I got the place for $260,000 I woulda stole the place. Coulda done some minor fix up, condo converted it, and sold each half for $200,000 a year or two later.
Anyway, in my opinion, there are lots of good general rules of thumb out there. However, you can't live by them. You gotta look at the whole picture, and see how you'll come out in the end with what you plan to do. ...and like somebody else said... What's a bad deal for one person is a good deal for another.