All Forum Posts by: Carlos Ptriawan

That's exactly where I confuse Dave. From the article, it seems the non-qualified ratio only matters if the appreciation is beyond $500k (if married). Below $500k, it has no effect.

I found another example from a different website: http://www.floresattorneys.com...



RIA illustration 2: Jack Able, a single taxpayer, bought a home on Jan. 1, 2009, for $400,000, and uses it as rental property for two years claiming $20,000 of depreciation deductions (thereby reducing his basis in the home to $380,000). On Jan. 1, 2011, he converts the property to his principal residence. On Jan. 1, 2013, Jack moves out of the home and sells it for $700,000 on Jan. 1, 2014, and thus has a gain of $320,000 ($700,000 − $380,000).

Under pre-Act law, Jack would have had $20,000 of gain attributable to depreciation deductions included in income (taxed at 25% as “unrecaptured section 1250 gain”), and would have excluded $250,000 of his gain (because he had two full years of ownership). The $50,000 balance of his long-term gain would have been taxed at a maximum rate of 15%.

Under the Housing Act change, the same $20,000 of gain attributable to Jack's depreciation deductions is included in income (and taxed at 25%). Of the remaining $300,000 gain, 40% (2 years ÷ 5 years), or $120,000, is allocated to nonqualified use and is not eligible for the exclusion (and is taxed at maximum rate of 15%). The remaining gain of $180,000 is excluded under Code Sec. 121 , since it's less than the maximum excludible gain of $250,000. Thus, the new law change costs Jack $10,500 (.15 × $70,000).

I'm surprised after reading this article:
https://www.accountingweb.com/...

Basically, if you have rental (or primary -> rental) and turn to primary, and then sell the property after live there for two years, the non-qualified use ratio doesn't really matter (in other words it's tax-free) as long as :
- when you sell, you live in the property for 2 years or more AND
- if you married and the profit of the sale is less than $500k.

Is my understanding correct?

These days I read 10-20 inspection/ledger/title/verifying tax/seller report/checking permit if available than analyzing deals...... The problem with buying investment property OOS is we need to give the deposit first before we can inspect the property. The seller has an unfair advantage. While in CA, most of the time, the seller already provides an inspection report to the buyer. Even when purchasing from a turnkey, there're many operators over there that don't disclose anything prior to a contract. They didn't even have photos sometimes. Yesterday I checked a turnkey that's selling 3BR SFR but in title, it says it has only 2BR. When I confronted this question they only mentioned it's normal in our market. Whaaattt ??

I think the right way to invest is the buyer shall be able to do buyer inspection prior to a contract.

Theoretically, you can invest in new development or stabilized class A/B property in a selected highly appreciated Market like CA/AZ/WA. Growth simply means Appreciation.

I'm from Sunnyvale too. I agree with the assessment. I noticed large MF > 10 units is more reserved to institutions and professional Real Estate/syndication. The risk and the unknown are just too great. In the Sunnyvale market, it's even almost impossible to think about it with the 3-4% cap rate that the market has right now. 

I can do the numbers with no problem but where I lack the experience is in determining the appropriate expenses for a neighborhood-----> 

This is what I feel too. I think the primary focus for investors shall not be analyzing the property ROI first but more focus on the Inspection report to determine the future Capex. Before even purchase, we need to understand the age of the roof/HVAC/any structural issue/etc. The problem is, those metrics sometimes are not undisclosed to us as the buyer during the purchase.

@Ari Hadar: Yes, There's some data/information from MLS that's only available to Real Estate agents.
Also in my area, the RE Agent is prioritizing Owner Occupied house first since the commission and price are higher. If you ask RE Agent for investment property they will throw you any property in the market expecting this property will appreciate blablabla, they don't understand to calculate IRR,CF, Rental Yield, CoC and other stuff.

Many times I'm the one that's teaching them where and how to buy good investment property.

So when I'm buying out of MLS these day. I asked the seller agent to become dual agent and credit their fee to me. For me buyer agent is almost useless.

@Michael Johnson: which company did the turnkey? Does it require City point of sale inspection before closing? 

@Justin Goodin Yes I've been looking for MF in Indianapolis too, but I've not found a duplex that has turnkey quality . What do you think about Red Door as PM ?

Yes I have a duplex in Birmingham. CF is great. About 1.2 rent value. Typical fourplex gives you 1.0 rent/value. Birmingham and Montgomery are more affordable and CF-ing than Huntsville. Huntsville is great when you factored in Appreciation.

I just finished analyzing your market actually, Birmingham and Memhis is having rental yield decrease of 0.9% in three years, which is good for both market.

When you pay off all your properties, and have 100% equity, you are not eliminating your risk...you just took on all of it--> Best answer. What Investor doing is really only pay the initial investment and hope to get out after a certain year.