All Forum Posts by: Allan C.

can I test how long this property has been in the family?  I ask because inherited homes usually have a $15-20k/yr tax difference vs current market rates, so just checking if that is similar situation for you.  Unless this home was purchased within past 10 years, I would double check that you want to give up the tax basis. 

May be worth you just moving into the property as your primary and keeping vacant to reduce future tax obligations. 

I don't let tenants self-paint, but I offer them the option to pay my handyman to paint a color of their choice. I also increase the deposit (if allowed by local regulations) to cover future cost of repainting back to the original color upon the end of their tenancy. 

Sounds like you're headed for repainting the unit at the end of their tenancy regardless of the color choice. They've already indicated that their kids will make a mess of the walls. 

I don't think you're at a decision point, so you likely won't have to make a decision in near future.

Everyone keeps targeting the 8% interest loan, but I'll ask you to look at this differently - how much would that property cash flow if interest rate dropped to 6%? Do you have any reserves now, or can you set up a HELOC? Being over-leveraged isn't the issue - it's not having sufficient reserves.

You also didn't mention the interest rate for your student loan - you likely don't want to pay that off if you have relatively low rates. You do have a fair amount of debt, but get some paper and do analysis to figure out how exposed you are. Then develop contingency plans for those scenarios and see if that makes you more comfortable. 

Unless regulated by local laws, I put deposits into a high yield or investment account. You should view deposits as a cash generation fund, and not capturing 5%+ yield on deposits is just leaving money on the table. 

I'll use an example - let's say you have $100k of deposits that isn't sitting in a high yield account. You're missing out on $5-15k annual revenue. You don't need to segregate your deposits from operating funds (unless legally required) if you are disciplined enough to track it by spreadsheet.

You need to maintain some liquidity for tenant turnover, but you don't need 100% of your deposits available. Depending on size of portfolio and market conditions, you typically don't need more than 10-20% liquid. But that's a risk-reward situation you need to self assess. 

Assuming you're taking about normal depreciation, you'd be absolutely crazy for not taking it. One of the biggest benefits of REI is using depreciation to defer/eliminate taxes. You're basically paying $3k more taxes a year by not using $10k+/yr depreciation to offset rental income. Over a 10 year span that's $30k minimum you're losing, and likely $60k+ due to opportunity cost.

And guess what, if you don't take depreciation, you may be on the hook for depreciation recapture anyway since it's expected that you take depreciation. 

lastly, if your CPA says that depreciation only defers your taxes and you'll eventually have to pay it, then ask him/her how they account for Net Present Value and compounding interest. There's also 1031x and step up basis that can further defer/eliminate depreciation recapture. 

same principles apply for bonus depreciation considerations. 

as you progress your REI journey you'll understand how powerful expense offsets are, even if some get suspended for a period of time. Safe Harbors are also your friend to expense items you'll normally capitalize.

wow, I've never heard any LLs with a portfolio actually endorse home warranty. Glad you have good experience with them @Crystal Smith as very few do, including myself. 

I generally do not repair appliances anymore since it costs nearly the same as purchasing new, and your useful service life isn't extended much for appliances built within last 10 years. I also never get home warranty because service is usually slow, many associated vendors are not best in market, and coverage often gets denied. Home Warranty companies have to make money as a business, which means the people who buy warranty coverage lose money (on average).  

however, when I do repair appliances on occasion, I use Chicago Repairmen because they provide good service at a reasonable price. Alex and his team are top notch and have strong reviews. I have no affiliation but am genuinely impressed by their service. 

my buy vs repair strategy may change depending on tariff impacts, but I'm sure repair companies will just increase labor costs to parity with replacement cost if appliance costs increase considerably. 

you're not going yo meaningfully reduce your W2 tax burden, so better that you focus your energy on increasing your income.

let's hypothetically say you can find $50k/yr losses to offset W2 income. that ultimately becomes $25k/yr net savings, which isn't insignificant, but it's likely not going to be worth the effort. you'll need a fair amount of capital or effort to generate $50k/yr losses, and its better to focus ther effort/capital on somerthing that's aligned with your investment strategy anr interests. 

@Account Closed it's not complicated. If you want to list for higher price then do so, but be ready to adjust price within 1-2 weeks if you aren't seeing good activity. Just don't let it sit on market for 3+ weeks with limited action. 

Sounds like you just need to get a roofer and solid window guy. Windows are often more expensive than the roof to replace, but I would budget $15-30k for the repairs, depending on size of home. I've had properties where I've chased leaks for years, so Joe's point is a real and common one. 

@Brandon Vukelich CPI will be greater than 2% so you have 9-10% increases you can apply.