All Forum Posts by: Adam Moehn
Adam Moehn has started 14 posts and replied 142 times.
Post: New member from Cedar Rapids, IA
- Investor
- Cedar Rapids, IA
- Posts 143
- Votes 29
Welcome to BP @Lori Bouska !
Post: Introduction
- Investor
- Cedar Rapids, IA
- Posts 143
- Votes 29
Welcome @Bruce Brown !
Post: New Old Member ;) Iowa
- Investor
- Cedar Rapids, IA
- Posts 143
- Votes 29
Welcome back to BP @Georgia Weaver !
Post: Cash out refi, simply for interest tax writeoff
- Investor
- Cedar Rapids, IA
- Posts 143
- Votes 29
If you plan to use the money to invest with, then that's a different matter. I suppose you'd have to decide if the interest you're paying in the mean time is worth the opportunity to have the cash immediately available. Personally, I would only do it if I was pretty sure I would be using it in the near future.
As to the writing off interest on up to two properties, I'm not a tax expert, but I'm not aware that there is a limit on the number of properties if they're being used as rentals.
Post: Cash out refi, simply for interest tax writeoff
- Investor
- Cedar Rapids, IA
- Posts 143
- Votes 29
If it's purely to be able to deduct the interest on your taxes, it's not a good idea.
An example: You paid $100 in interest, then deducted the $100 from taxes. If we assume a 25% tax rate, then you've reduced your taxes by $25.
So you've paid $100 in interest to save $25 in taxes. That leaves you down $75. If you think that's a good idea then, please, feel free to send me $100 and I'll happily send you $25. :)
Post: New from Iowa
- Investor
- Cedar Rapids, IA
- Posts 143
- Votes 29
Welcome to BP Matt!
Post: New from Des Moines, IA
- Investor
- Cedar Rapids, IA
- Posts 143
- Votes 29
Welcome to BP Robert!
Post: Should I sell for loss, or Refinance rental
- Investor
- Cedar Rapids, IA
- Posts 143
- Votes 29
Keep in mind with option 5, if you take a loan on another property to pay down the loan on this one it only really helps if the loan terms on the other loan are better. If it's the same, then it's little more than an accounting trick to make this property seem better at the expense of another.
Post: Should I sell for loss, or Refinance rental
- Investor
- Cedar Rapids, IA
- Posts 143
- Votes 29
I'm not sure where you're getting the 17k from. That's the amount of expenses each year but there is rent to offset most of it. The net loss is less.
Jeff, I notice your numbers don't seem to include any repairs/capital expenses. They will come up if you keep the property so should be part of the conversation.
Post: Good buy? 10% cap rate, 8.5% coc, $35 cash flow?
- Investor
- Cedar Rapids, IA
- Posts 143
- Votes 29
Originally posted by @Michael Seeker:
@Mike Williams - Your CAP rate shouldn't be higher than your COC returns if you're leveraged in this lending environment. Generally speaking, COC = CAP when you buy with all cash. If Interest Rate > CAP then COC < CAP. If Interest Rate < CAP then COC > CAP.
By that logic, unless you're paying really high interest, your COC should be higher than 8.5 or your CAP should be less than 10...care to share how you're calculating these?
Not necessarily. That would be true if the loan payments were interest only, but generally there is also principle being paid. So depending on the loan terms the COC could be less than the Cap rate even if the interest rate is low. That said, if we're looking at a long term loan, like 30 years, then you're probably going to be right about COC > CAP.
Back to the main topic, I would consider $35 to be within the margin of error for estimating cashflow, making COC an unreliable measure since it would only take $35 of error in estimating rent, repairs, vacancy, or anything else for it to be break even.