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Updated about 14 years ago on . Most recent reply presented by

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Marcus ONG
  • Real Estate Broker
  • Singapore, Singapore
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Buying older property for cash flow

Marcus ONG
  • Real Estate Broker
  • Singapore, Singapore
Posted

Hi

I found some multifamily properties in the AZ area that gives pretty good cash flow.

However, they are pretty old and is generally more than 27 years old.

Increased maintenance aside ( I will have to engage a professional inspector to advise me as I am not familiar with the building code and on top of that I am not present locally), I am concern that I am unable to use the depreciation to offset the profit and the taxation will eat significantly into my profit.

Would appreciate if I get can some opinion on the matter.

Thank you in advance.

Marcus

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Sharad M.
  • Carlsbad, CA
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Sharad M.
  • Carlsbad, CA
Replied

Do you have numbers on the properties?

At least in my market, 27 years isn't very old. What's the age of some of the other buildings in the area?

It's always a great idea to have an inspection. Just make sure the inspector in licensed. May be some here from AZ can recommend an inspector.

Are you buying these properties without seeing them? I would be EXTREMELY careful about that.

As far as depreciation is concerned, your depreciation base will be the price you pay for the building and it has nothing to with the age of the building. Let's say you buy a building and own it for 25 years, you will take depreciation on that building for 25 years and when you sell it after owning and depreciating it for 25 years, the new owner will have a new depreciation base and will start with the purchase price. Hopefully, some CPA can correct me if I wrote something incorrect.

From your questions, it doesn't sound like you are completely ready to start purchasing multifamily properties. You will be better served spending more time on BP and trying to understand what's involved in real estate investing.

Do you have a US contact or are you just trying to make all this happen from overseas? Don't rely on any real estate agent, always make sure you do your own due diligence.

As part of your real estate team, make sure you at least have a great CPA (specializing in real estate), real estate attorney, and an agent.

Good luck!

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