Investor · Durango, CO · Member since 2008 · 163 posts · 59 votes
I am reading the Millionaire Real Estate Investor, about acquiring a million in real estate, then increasing equity to one million, then to one million a year in cash flow. I am just curious how many here on biggerpockets have over 2 million in real estate.
I for one would never post on the internet that I had $2 million of assets of any sort. Or any other large(ish) number.
I will also argue that there is a HUGE, HUGH difference between "controlling" $2 million of assets using leverage or investors and having $2 million of equity. Income real estate is a cash on cash game. $2 million of equity will produce a very nice return. A tiny sliver of $2 million of controlled property because you're over leveraged it or have a bunch of investors who own the bulk of it doesn't produce much income at all.
OTOH, being a syndicator can produce a very nice income. Even if the property doesn't actually produce much income for your limited partners. You'll get your management fees right off the top. Now, I'll argue that's a job and not an investment, but, hey, income's income.
True. I update a spreadsheet fairly often with the values I estimate based on my knowledge of the area, county appraisals for the tax assessor (some counties are right on the money), and with my debt so I know my equity. Doesn't seem that hard to know one or the other. I'm not asking for exact figures.
Going from $1M in equity to $1M/year in positive cashflow is a huge step. In the Silicon Valley, that's equivalent to $25M of free and clear properties at 4% cap rate.
It's easy to have over $2M in real estate equity if you started with $4M. Ok, I stole that line from Bill Gulley.
Under current tax law there are caps on deprecation, if you make more than $100,000, and phased out if you make more than $150,000. the only exception is if you are a "real estate professional".
Before the caps were placed on depreciation and before the depreciation schedules were extended to 27.5 and 39 years, there were much more opportunities to high depreciation offset a high income and it was easier to pay no taxes. Ah, the good old days.
It isn't too hard to be a real estate professional if you are managing millions in RE. Yes, abide by the IRS rules. Rich Weese, who used to post here a lot, wrote often about paying no income tax with lots of assets and income.