All Forum Posts by: Bill B.

2 schools of thought right? You don’t want the guy to not get back to you. Did you tell him when you reached out to him that one of his big customers recommended him? If so bad form on his part. 

But you also don’t want the guy that is instantly available. The best roofers might be 10 days out on estimates and 2 weeks after that to start for non-Emergencies. 

@Elliot Marszalek

Yes, because of the way the math works the first 2 years are worth the most and then each successive year is worth less and less. 

@Terry Lao

You might be in a higher tax rate than me, especially if you have to add that $182k to your income. 

The depreciation is so small I’ll assume you have that right but it’s 25% on building value * 3.63636% per year. 

California is hosing you. But you might also go in to a higher bracket there with this extra income. 

Here’s national taxes for last year. 

Tax Brackets for Single Filers

Tax Brackets for Married – Filing Jointly

@Elliot Marszalek

Sorry elliot, I wish that were true, as I’m about to do that very thing. It used to be true but too many of our elders took advantage of that sweet deal. 

If the property is a rental first, even for only a year, you have to live in it for 2 of the last 5 years, but then you only get the percent of total years owned it was your primary as a tax free sale. 

In this case, rental for 9 years, then primary for 2 years, means primary was 18.18% of total owned time, so that percent would be capital gains tax free. 

No worries. I’m always wondering the same. I’ve never sold a property yet but I’m about to sell my primary and move in to a previous rental. Even that sale is only because I can take the gains tax free today. It’s hard giving up $20-$25k in rental income “forever” by selling to make a couple hundred k today. (Which is exactly what I’m doing.)  (The idea for me is living on the rental income means never selling anything in the stock market.)

Terry, 

How do you prevent length of ownership and loan balance from forcing sale?

In your example I buy $120k place, put down $30k so if I sold day one I’d net only my $30k so I don’t sell. 

30 years later for some reason rents and values have been virtually frozen. I’ve paid it off and I can still sell for $120k but now I do sell?

Or I pay $120k cash so I sell the next day and get my $120k net back?

If you meant “profit $120k net” (IE sell for $240k.) it makes more sense but still seems arbitrary. What I paid for it should make zero difference on selling. In that example the guy who paid $100k sold much earlier, the guy who paid $120k sells today, and the guy that paid $125k doesn’t sell. So the worse the deal you got on the property the longer you keep it?

Ps. I think you know me well enough to know it’s a serious question.  Using your formula I have to sell a dozen houses. 

Tom, it doesn’t say where you’re located. If the places you mentioned are all out of state I’d cross off any properties that are cheap, old or subject to high maintenance. (Snow, wood siding, big yards, etc...)

Out of the options you listed I would say 3-4 bedroom, less than 20 year old, tile roofed, stucco sided, desert landscaped home. Phoenix/Vegas. (Nevada leading with no income tax and slightly lower property taxes)

The old homes and studio/1 bedrooms aren’t appealing to me for turnover and maintenance reasons. Texas is a hot market property taxes are very high. 

These houses are going to act more like value stocks. They’ll probably be cashflow neutral but you’re expecting in 30 years when it’s paid off it has doubled twice. (4.8% per year). So you put down 25% and end up with 16x return resulting in a 9% pretty safe, pretty much tax free return.) and then the cashflow kicks in. 

If you need the money you refinance< if you don’t you leave it to family/friends tax free. 

In Vegas I cashflowed right through raising rents yearly. i’ve heard that multifamily got hurt but my single family did waaay better during the recession than before. Renters came out of the woodwork. The quality of renter went way up and the number to choose from as well. They also stay much longer. I still have several renters in place since then. 

IMHO it’s much harder to be a landlord during a real estate boom when everyone’s doing it and everyone wants to own. 

The easy answer seems to be set it for 66. Does it go down to the desired 69 degrees? if so, problem solved, if it’s still 72 you got a problem. Fix or replace ac unit or fix/upgrade insulation. 

@Jose L Martinez

What little I can add to the experts...

You said:

“Part of that includes a decent amount coming from my escrow account.”

Money from an escrow account is already your money, there’s zero tax on getting your money back. Don’t count this amount in your taxable gains. 

Rough rough rough numbers would be 

purchase price - net sales price x 15% = capital gains tax

Purchase price times 80% times 3.63636% times 9 times 25% = depreciation recapture tax