All Forum Posts by: Christian D.

@Dave G.

Really interesting thread!

If you have ZERO ordinary income, then you are at at a 0% tax rate for ordinary income. Obviously. The sale of the property should not, in itself, generate ordinary earned income, right? Only LTCG income.

A good question that hopefully a CPA can help with: would your depreciation recapture essentially be considered ordinary income at that point? E.g. you have zero income, but $38k in recapture. So are you taxed 10% on the first $9875 of recapture (looking at ordinary income tax brackets here...), and then 12% on the remaining $28,125?

After that, your capital gains tax will kick in. Assuming the above is true...you'd pay 0% tax on the first $2k of capital gains (LTCG rates are 0% below $40k income), and then you'd pay 15% on the remaining $127k LTCG. The 15% LTCG bracket goes up to $441k of total income.

If the recapture rate would not count as ordinary income, then your LTCG tax would be 0% on the first $40k, and then 15% on the rest.

Disclaimer: I'm far from a CPA! lol.

Well. I don't know for sure yet, as I'm still a newb myself, but the more I listen and talk to people, the more I gather that REI is very much about people. In order to be successful, I expect to have to deal with people. A lot.

Hey Curtis, ya man...that makes sense. We obviously can’t predict the stock market, but same goes for RE. Can’t know what the house will be worth when you go to sell it either. Sure you’ll have cash flow, but it sounds to me like you’re taking all the risk for 50% of that. I guess it would remain to be seen what the coc return would be and how good of a deal he could find.

You're the judge of how much risk is worth your reward. You could put that money into CD's and earn 2% on it risk free with the same tax structure. Assuming you're not maxing out both a 401k and Roth IRA, you're also ignoring opportunity cost to take advantage of some serious tax deferrals or tax free earnings.

I dunno. I’m still new to this too! Haha. But to me it seemed worth it to play devil’s advocate. 
 

Truth be told, I don’t remember exactly where (what document) I read it; we worked with a great real estate agent who helped my mother - who is up in age - read through the the association rules. I was there helping her to understand things, and I know I came across that in one of the documents. I would think just asking the association, or having your agent do it it for you, would be a quick and easy way to get your answer though!

Ha...I’m a numbers guy myself by day (an engineer) but I’m also a business owner on the side in a very sales / people oriented field...so both the numbers and the people aspects of real estate investing appeal to me. 

But, especially in something as "simple" as owning a single SFR, the numbers that you have to work to figure out if your property will cash flow aren't that difficult to understand. The more difficult part, to me, seems like it will be finding an actual *good* deal that fits your numbers, and figuring your input data (e.g. repair costs, vacancy rate, etc) correctly.

Newb here too with a plan to purchase a property next year. It’s exciting isn’t it?

One thing: make sure you’re actually allowed to turn the condo into a rental. My mother just purchased one (to live in) and I remember reading that the association strictly forbade it. 

There’s lots of material out there (and on this site!!!) about how to analyze the numbers and figure out the right price point for making it a “good deal.” If the math works...it’ll alleviate that fear. At least I know it would (will) for me. Numbers, when they’re right, don’t lie!!

I'm brand new to this, but that seems like a lot of risk for 4% ROI. Will you be taking a hard look at the numbers to see if the property will cash flow well?

How will your loan/interest income be taxed?

Will be watching to see what the more experienced people have to say!

Hey all!

Whelp, after starting this thread over a year ago, those books I ordered sat around, and I didn’t take any action. Although my wife and I did have a baby! Haha.

But, friends, I'm back with a "re-introduction" for myself. I've now become a reading madman, can talk about ARV and NOI all day haha, and also have been binging the podcast soaking up tons of information. I'm ready now with a realistic timeline and a few starting goals: I want to take the rest of this year to learn everything I can, bolster my cash reserves, build my team, and get serious about networking. Time to take action and get out there talking to people!

Some details like SFR vs MFR still TBD, but I'm starting simple. My goal is to own a rental property that produces positive cash flow by the end of 2021, ideally with a 12%+ cash-on-cash return.

in the meantime, you will see me around!

One final bump of desperation! 

Bumping this.

Anyone have any advice here?

I would think this might be a common situation for people and other newbs like me might appreciate some clarification too!

How would one perform these "deal analysis" calculations when converting current home to a rental property?

Say we have 2 scenarios:

1. Converting to rental while keeping current financing:

• 15 yr fixed @ 2.85%
• Purchase price $106k
• Home value: $150k
• Mortgage balance $50k

2. Cash out refi before converting to rental (after satisfying any occupancy rules). Down payment for next house helped along with cash out liquidity.

• 30 yr fixed @ 4%
• Home value: $150k
• Mortgage balance: $90k

ARV is pretty self explanatory...but how do I look at COC and other sort of calculations like that. What do I use for purchase price...$90k? What about down payment? For scenario 1 the down payment and purchase price was a decade ago...is that still relevant?

Can anyone provide any guidance? It's confusing because I already own the property and therefore don't have a straightforward (current) purchase price, down payment, etc, that seem to be the starting point for the analysis.