All Forum Posts by: Chris Armstrong

@Patrick Liska This is EXACTLY what I suspected with regard to depreciation recapture. Im glad that you shared this excel sheet thank you. I need to look at it to unpack it but I love the idea of having a model to show the opportune time to sell something or unload it. 

@Jay Hinrichs @Jeff Glass @Eamonn McElroy @Barry Ruby @Yonah Weiss

One more question to you all: The valuation for the land and improvements at the time of purchase is what recapture is based on correct? As you hold the property longer in theory it would appreciate (both the land and the improvements) but that recapture basis does not change over time as well correct, its based on the original purchase valuation?

@James Isaacs 

I got a HELOC on my current primary which will become a rental in a few months. I dont know how much LTV you can get on a secondary residence HELOC, but sure I will keep you posted

@James Isaacs I am not sure I follow.

What I can tell you is using the small local bank in my area, I was able to get LTV of 89.9% of appraised value, and because I opened a checking account with them (zero balance requirement) all closing costs were wiped out, so it cost me $0.00.

I have a 10 year draw period, and a 20 year repayment period on the loan if I get debt on it. I have not closed on it yet so I dont know what the payments will be. 

@Shiva Bhaskar

Have you ever seen the movie "How High?" It has Redman and Method Man in it, and for that reason alone you need to watch it..

Best advice ever for how to pass tests.....1) Study high 2)Take the test high 3) get high scores. You live in CA so it shouldn't be a problem for you to get necessary study materials......

Also, its probably the easiest test you will ever take ever in your life, and being an attorney you're already versed in the subject matter. Again, as many have stated it really will not help you get more deals and in fact it will cost you upwards of $1200+ dollars a year to maintain your license with REALTOR dues and MLS fees and card fees, centri-lock classes, continuing education classes etc.... So weight the pros and cons

Closing on my HELOC tomorrow in a very similar situation. It didnt make sense to cash out the equity and increase my monthly payment in my now current primary residence since it will be a rental soon. The HELOC allows you to tap the equity without making your payment higher (until you borrow against the HELOC) while enjoying the benefits of a small mortgage payment yielding cash flow each month. Its nice to haveHELOC and now once a deal comes up that interests me I can just buy it and use both the cash flows (one from subject property and then new property bought with heloc) to pay down HELOC.

@Greg Davis

@Barry Ruby Seems like its worthwhile if you're saving such significant monies on projects. I am not in that league yet but ill learn more about moving forwards. 

@Jay Hinrichs apparently I need to look into notes... 

Thanks for the great responses. Fantastic. It certainly makes it easier to cope with the tax if you know what it is. Certainly many things to consider and important when dealing with proper amount of time to hold the investment. 

@Jeff Glass @Eamonn McElroy

@Jay Hinrichs

Hey BP 

I have been thinking a lot about the issue of depreciation on rental properties and what happens when you sell one after a long time without use of a 1031. 

I guess I have been thinking about a property that is owned outright and has no mortgage on it. Lets say you bought with cash ($100K) and held for a long time (28 yrs). Would you actually lose some of the original money used to buy the property  if the market didn't experience and significant appreciation over the 27.5 (life of depreciation) years and sold for $100K? I know you can 1031 exchange and avoid it all. It just makes me think there is an optimal amount of time to hold a property for and sometimes that might not be forever. 

I have not really read many posts about depreciation recapture and what that looks like on the selling end of the investment. So, any words of wisdom or good references for this type of thing would be appreciated. Also if you have experience in doing this, it would be beneficial to hear how it played out for you. 

Conversely, How would this look different if the property appreciated from $100K up to $200K over the lifetime of the investment? I assume cap gains would be another chunk taken from you at the end alongside the depreciation recap.  

Thanks 

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