All Forum Posts by: Aidan Mulligan

Call or go to the town hall and see what information they can provide.

@Filak Thomas What you're referring to is a 1031 exchange and while I don't know all the details because I've never done one myself I do not that there is a time limit of like 45-60 days from the day you sell your home in order to qualify on the not paying taxes bit.

Also, for capital gains tax on an investment property you only need to own it for one year. Less than one year and you get taxed at your income bracket, longer than a year and you get taxed at capital gains which is around 15%.

The two years you are referring to is for primary residences only. After a home is your primary residence for 2 or more years you get a sales tax exemption up to a sale price of $250,000 if you are single or $500,000 if you are married.

I highly encourage you to talk with a CPA in order to avoid IRS penalties.

Then in that case I don't see anything wrong with the numbers other than the interest rate. In my area 4.8% is typically the lowest anyone will go but it's a bank by bank, area by area thing.

Good luck!

First thing I see is that you are putting a down payment of 3.5%. Are you planning on getting an FHA? If so you are required to live in one of the units. I'm not familiar with the area but is rent for one unit at $2,900 a reasonable expectation?

Unfortunately, there is no good rule of thumb. The reason being is that the estimates are based on everything from the physical location of the house to what kind of siding is on the house.

I can tell you that for my 920 SF 2/1 with vinyl siding, not in a flood zone, with a 9 year old roof. I pay about $600/year.

@Basit Siddiqi I think he might be referring to primary residences sales tax exemption of $250,000/$500,000.

@Bryan Hua There is a lot to unravel here so let me take my best stab at it.

1) Short answer, yes. The goal is to find a property where rents would still allow you to be cashflow positive. Example, you get a home and the cashflow is $250 then you refinance and cashflow drops to $150. You use that cashout to buy a new property and that property cashflows for $250 so now you have two homes cash flowing at $400.

2) Previous answers question 2 as well. They do this strategy so that they can increase their portfolio. You essentially are not using your own money so you don't have to wait and save because as you pointed out, it's the banks money you are using.

2a) The biggest risk is that you can't find renters and now you have to pay for these loans on your own. Some would say the market downturn is a risk as well but I don't worry immensely about that. Obviously lost property value is bad but as long as you prepare with savings and don't buy bad houses then you should be good.

2b) Good question, don't have the answer. Cash reserves are the easiest answer.

Scenario 1)

1) Yes, because the rent from the first property is paying for the financing. What's the difference between you paying for the financing and the tenant paying for the financing. The difference is that you aren't paying for it.

2) No, if you have the option to not use your personal finances in a deal, then don't do it. Save that for a rainy day

Scenario 2)

1) Yes, they would, just as long as you meet their minimums. Many banks won't lend below $50,000 but so as long as the 40% downpayment doesn't take your loan below that then you should be fine.

2) I'm not sure what you're asking. Don't use the cashout refinance to buy a Lambo if that's what you're thinking.

3) You could, but I wouldn't. I would only refinance up to the amount you need. It's cash to use for a purchase but it is still debt. That's like taking out a bank loan just to hold onto and pay interest on.

Hope I answered well enough.

I was not aware that it was mandatory, like I said not a tax professional, but those are the basics to it.

If you're referring to the depreciation of the actual property then the pro is that it's tax deductible. The con is that when you sell, your capital gains will be higher.

Household depreciation = 27.5 years

Capital gains tax (typical)=15%

Example: You have a $150,000 home that you depreciate at the 27.5 years = $5454 deductible from you taxes each year. If you hold for 10 years and now sell for say $200,000 the capital gains would be $200,000-$95,454=$104,546. Taxed at the 15% rate would be about $15,681 in owed taxes. The $95,454 comes from $150,000-($5,454*10 years)=$95,454

Profit = $34,319

If you don't depreciate then you don't get the tax deduction but your capital gains is also less. 

$200,000-$150,000= $50,000.  Taxed = $7,500

Profit = $42,500

Now I am not a tax professional and that is a pretty basic explanation of how it works. There are obviously reasons why someone would or would not choose to depreciate their property. Everyone's situation is different and it might make sense to depreciate or might not make sense. Talk with a CPA to find out what's best for you.

I'm not sure about success rates but sites like Cozy will post rentals for you to some of the popular sites and then collect applications as well.