All Forum Posts by: Bill B.

I assume there is zero or almost zero appreciation and that’s the reason you aren’t selling tax free?

if there is appreciation, but you wouldn’t sell your current home tax free and buy a neighboring home to rent out, (There by raising your cost basis for additional depreciation and lower capital gains tax.) then it probably doesn’t make a good rental property. 
. 
I’m all for getting started and primaries make good rentals when only held for a year or two before they’ve had time to appreciate. But I see people turning long term or highly appreciated primaries in to rentals. Giving up $100k+,in tax free income. Not considering it will take years of perfect rental with no vacancy or capex just to “break even” with where they are today. 

The new heat pump all in ones (120 instead of 240 and don’t need venting) are much better than the older all in ones. They may take 2.5 hours instead of 2 hours for a complete load but there’s no need to switch. I personally think they are “higher end” than anything stackable. But I’d also buy the $200 5 year warranty.

My last/only stackable I bought last year was LG, the combined towers to try to reduce noise, increase ease of use, and presents higher end look. But same story I bought the $190 5 year warranty. As if one part dies the whole thing is dead. 

BUT, like others have mentioned. It literally takes 10+ hours for the washer seal to dry. This means leaving the door open that long to dry. (In Vegas where it’s super dry.) or using a rag to dry the seam to avoid mold/mildew and horrible smells. 

AT MOST you rent it out for 2 years and then sell it but honestly you’re probably better off just selling it.

Assuming zero vacancy and zero capex you’re going to make about $12k/yr. I didn’t see your location in your profile or your post, but assume at least 17% state/federal taxes leaves you with $10k/yr. 

To get that $10k yr you are giving up $250k tax free. ($300k has to be earned to net $250k.) so you’re looking 5 years of zero vacancy and zero capex to break even. EXCEPT. That $250k sitting in the bank with no chance of vacancy or capex could earn you $11,250/yr at 4.5%. 

So now you’re making $750/yr being a landlord. Assuming zero capex or vacancy. Not too good. Yes. You will make more from loan pay down, yes you SHOULD have some appreciation. But you also SHOULD have some vacancy and some capex on an 80 year old house. 

If someone offered to finance this house to you at your current rates if you put down $250k would you do it? No, no you would not. You’re trying to ruin the biggest benefit of the life in flip. 

Good luck either way and good job on the remodel. 

Sorry. I thought you were building to sell. In that case you might save taxes building with them. If you plan to build your own primwry you absolutely want it to be your primary first not investment land first. (Anything that isn’t your primwry first is only tax free on a pro-rated basis.)

I don’t know how you could swing it but…If they gifted you the kand they would avoid their capital gains tax. The downside is you would inherit their very low basis. The upside is if it was your primary the first $500k would be tax free 

Definitely talk to a tax guy BEFORE you do anything. Assuming an only child situation where you’re not screwing a sibling. Find out if they can gift you the land. You use the land as collateral to build. After it’s built borrow on full value and gift the parents back the land value? I don’t know how hard th IRS would frown on it but I’m sure it’s done all the time out in farm country. 

@Alan F.. I was going to. But I can’t stand the humidity. Really the plan was 6 months there and 6 months in Vegas. (I REALLY can’t stand state income taxes.  Especially paying MN taxes on NV tax free properties. Plus each house sitting empty for t months seems wasteful.)

But it’s hard to find a warm but not hot and humid location. I missed out on Colorado Springs and probably Reno. I assume mountain towns are my only option for cooler in the summer without humidity. 

Ps. As I’ve long said. If San Diego wasn’t in CA that’s where I’d live. Though my last visit turned me off with the traffic and prices. Maybe somewhere in Oregon or Washington away from the madness of Portland/Seattle. 

I was going to bring up that the seller financing doesn’t matter if you plan to get a construction loan as the seller financing will have to be paid off. 

Also, don’t forget while the parents are going to get hit with a $30k+ state taxes bill. You will also get hit with a tax bill if you sell on that discounted price. (You say it’s worth about $100k more than you’re paying so figure an extra $15k.)

Maybe you’d be better off partnering with the parents unless they have zero interest? Especially if you built something to rent or live in. 

Posted twice for some reason.  

Yes has long as you are worthless you’ll be fine. The problem is mainly a concern for people with a net worth or reasonable income. 

If you put a small downpayment and they foreclose they can come after you for the shortfall. 

Imagine you put down 3% on a $400k property. $12k. You magically get the seller to cover every single closing cost (A $12k gift, or a trick to get you to buy their problem.). You payment is $2,600 plus tax and insurance. You make a go of it, but a year later you run out of money. 

You borrowed $388k and you’ve paid your loan down to $384k with your $30k in payments. Luckily the property hasn’t gone down in value so the lender lists it for $400k and gets it. They give the same $12k in closing costs to new buyer, $24k in realtor commissions, tack on say $4k in late fees, foreclosure costs, etc etc etc  so they “net” $360k. Now you owe them $24k. 

As mentioned. If you have nothing, and make nothing, you declare bankruptcy, wreck your credit and try to go back to renting. But if you have assets or income, you might end up $36k worse than you were before you started. (Your $12k down and your new $24k debt.)

The “trick” in regards to less than 10% down is people think they bought and asset or have equity. While they may owe less than it’s worth. They actually owe more than they can sell it for. Even with 10% down you’re “hoping” that’s all you lose if it all goes wrong. 

Find a partner, find co-workers/friends/relatives you wouldn’t mind living with, find a property you can buy for less than your current rent. Yes, get started. But unless you have nothing you do risk losing what you have. 

It probably depends on the rent. 

I pay 8% in Vegas where my average rent is $2,000-2,2000.  I paid a flat $80 or 90 to MN renters warehouse when I first purchased there because the rent was $2,700. (I think they charge around $110 last I looked.) 8 years later the tenant they placed is still there but I have self managed for the last 5 years as rents have climbed to $3,500. 

A percentage charge is bad for the landlord as rents increase and bad for the PM in areas with low rents. It’s probably harder to manage a $600/mo class c property than a $4,000/mo class A. So a PM can’t charge $50/mo and stay in business, and you can get your money’s worth at $320/mo. 

I find myself selling stuck in the gray-zone of $160-$180/mo. Hopefully that means my PM and I are both happy with the deal.  :-)

Hey @Jake Andronico

I know you specialize in Reno but since it’s close I thought I’d ask. 

I watched a Brigg’s YouTube video on best places to retire and Carson City was #2.

I was thinking more of drive up occasionally during the summer place unless Vegas gets much worse. 

Do you have an overall opinion and an opinion compared to Reno/Vegas?

-thanks.