New member on BP - buying 2nd LTR

[Andrea Miller]

Investment Info:

Condo buy & hold investment.

Purchase price: $125,000
Cash invested: $35,000

I made an offer that was accepted this week and close on August 25th.

What made you interested in investing in this type of deal?

Steady cash flow and LTRs are pretty low effort to manage, typically. I'm a W2 worker at Sr Management level. So, don't want to put a lot of time into it or pay a lot in property management fees.

How did you find this deal and how did you negotiate it?

MLS/realtor,com

How did you finance this deal?

Conventional. 401k loan funded down-payment.

How did you add value to the deal?

It was priced below market.

What was the outcome?

I bid $7k under list price. They had multiple competing offers. They accepted highest. That buyer backed out. The selling agent reached out to my agent and we quickly submitted a new offer at list price, which is a great price on a 3BR condo within 5 miles of oceanfront and reasonable HOA.

Lessons learned? Challenges?

If a property is already priced below market on the MLS, don't risk losing it by trying to go too low

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes. Dayna Caradori

[Ashish Acharya]

The piece I would flag first on a buy and hold condo like this is depreciation, because a lot of investors leave money on the table in year one. Even at a 125k purchase you strip out the land value and depreciate the building over 27.5 years, and with a condo you can also fold in your share of certain interior components. A cost segregation study is usually worth running even on a smaller unit like this, since it pulls deductions forward when paired with bonus depreciation.

The 401k loan funding the down payment is the one to watch. The loan itself is not a taxable event, but if you leave your W2 job before it is repaid, the outstanding balance can be treated as a distribution, which means income tax plus a penalty if you are under 59 and a half. Since you are at a senior level and could change roles, keep that repayment timeline in view as part of the deal.

As a W2 earner, the rental loss depreciation creates is passive, so it offsets other passive income first. If your combined income is under 150k the 25k active participation allowance lets some of it hit your regular income, and above that it carries forward until you sell or generate passive income to absorb it. Either way the deduction is not lost, just a matter of timing.

Being oceanfront adjacent, if you ever flex this into short term rental use down the road, the tax treatment changes meaningfully, so worth keeping that option in mind. Happy to connect!