All Forum Posts by: Costin I.

@Basit Siddiqi - the question is not how many doors, and @Wayne Kerr- the question is not how to bring the taxes on rental income to zero. Nor it matters what your expenses are, or depreciation is, for the purpose of this inquiry.

My question is the from the other end - how much do I need to make, after deducting expenses and depreciation (which can be variable), so that after taxes I get 100K clear?

Let's say Person 1 makes 300K in gross rental income, has 110K in deductible expenses and another 60K in depreciation, which leaves him with 130 (???) taxable income, for which he pays 30K (???) income tax, leaving him with 100K net clear.

Let's say Person 2 makes 220K in gross rental income, has 50K in deductible expenses and another 40K in depreciation, which leaves her with 130 (???) taxable income, for which he pays 30K (???) income tax, leaving him with 100K net clear.

Different people, different situations, but ultimately both clear 100K. They both end up with the same taxable income (assuming no other income from other sources, and no itemized deductions or otherwise, filling jointly married, no state tax), and after paying income tax, they end up with 100K.  The question is "what is the taxable rental/passive income, and what is the tax paid, that results in 100K after tax" ???

I want to know where (the $ figure) I need to be after rental expenses and depreciation, that after taxes will net 100K. What dollar amount taxed as passive income (assuming no other income from other sources, married filling jointly, no state tax and no itemized deductions or other than standard deduction $25,900) results in 100K after taxes?

@Joe Scaparra - thanks Joe for your helpful answer. Been trying to figure out an answer to this dilemma for awhile now, even my CPA is taking a long time to get back to me.

From my research (after I posted here...sometimes just trying to formulate the question leads you to the answer) this is what I found:

1. Rental income is taxed as ordinary income according to your Internal Revenue Service (IRS) tax bracket. 

2. I used a net-to-gross calculator to estimate a gross "paycheck" of $132,156.90 nets $100,000.00 (filling status married, zero on everything else). 

So, basically, we'll need to net $132K after rental expenses and(!) depreciation to clear 100K after federal taxes. 

What should be the gross rental income is very much dependent on specific situation, what are your rental expenses (all of them, including property management), like @Joe Scaparra mentioned, if you have mortgages or not, what is your depreciation (and have to careful there, if you used CSS to accelerate depreciation, and how will it affect you in later years). Since we see the same kind of ~40% going to expenses, the gross will have to be 200Kplus for sure.

Now, if only any of the tax experts could concur on these findings... 

@Nicholas Aiola - In my planning for retirement, I estimate my family annual expenses to be about 100K. I want to know how much do I need to clear in rental income to be able to cover that.

Obviously, the depreciation should make the taxable rental income question better, but to keep things simple, we’ll not consider the depreciation, just all the deductible expenses (mortgage interest, taxes, insurance, repairs, materials, management, any and all other expense rental related). Also, we'll assume there is no other income (no job, no interest on savings, no investments) other than rental income, and I need to clear 100K after all the deductible expenses (mortgage interest, property taxes, insurance, repairs, materials, management, any and all other expense rental related) and TAXES. Filling status married, 2 kids, no state tax.

Or, to reverse the net into taxable gross, how much do we need to clear in net rental income, so that after paying taxes on it, will have 100K free and clear?

In my planning for retirement, I estimate my family annual expenses to be about 100K. I want to know how much do I need to clear in rental income to be able to cover that.

Obviously, the depreciation should make the taxable rental income question better, but to keep things simple, we’ll not consider the depreciation, just all the deductible expenses (mortgage interest, taxes, insurance, repairs, materials, management, any and all other expense rental related). Also, we'll assume there is no other income (no job, no interest on savings, no investments) other than rental income, and I need to clear 100K after all the deductible expenses (mortgage interest, property taxes, insurance, repairs, materials, management, any and all other expense rental related) and TAXES.

Or, to reverse the net into taxable gross, how much do we need to clear in net rental income, so that after paying taxes on it, will have 100K free and clear?

@Jacob Krafka - are you asking for a checklist for buying an investment property, a due-diligence checklist, or an inspection checklist? 

Here is one for the steps involved in buying an investment property:

[ let me know if you think anything's missing ... or you want the other ones ;>) ]

Offer Acceptance

1. Schedule inspection
2. Attend inspection and fill out the repair list
3. Send earnest money check to escrow company
4. Send option money check to escrow company

Option Period

1. Send earnest money check to escrow company
2. Send option money check to escrow company
3. Schedule inspection (regular and termite)
4. Attend inspection and fill out the repair list
5. Is foundation inspection needed? Schedule foundation inspection, if needed
6. Attend foundation inspection, if needed
7. Check public records for any liens against property and/or owner
8. Check owner on social websites
9. Check public records for any liens against tenant (once application is received)
10. Check tenant on social websites (once application is received)
11. "Receive and carefully review the following documents:
• the tenant's application
• a copy of the current lease - How well does it align with yours and when does it expire? Is the tenant a relative of the seller? Contact tenant and verify lease and condition form.
• a copy of the inventory condition form
• the tenant's payment history (deposit slips, etc.) records
• a copy of the picture ID of each tenant and person over 18y.o. living in the house"
12. Get clarification on the house inventory - see email for full list

Purchase Closing

1. If you are satisfied with the results of the inspection, REAwill notify your lender and tell them to order your appraisal if he/she has not done so already.
2. It usually takes 3-5 days from the date your lender orders the appraisal for the appraiser to schedule and conduct the appraisal.
3. The appraisal takes 3-10 days for the results to be returned to the Lender and for us to know the number.
4. During this time your lender should have all of the required documents. It’s best to check in with your lender to confirm he/she has everything they need.
5. Ask title to add home warranty. (Research z-groups for best one)
6. Advise title of security deposit and pro-rated rent transfer
7. Contact tenant and verify lease and condition form + inform them that after close date to make checks to you from now on
8. "You should call a local insurance company to get homeowners insurance quotes at this time. It's best you email your insurance agent a copy of the MLS Listing of the home you are purchasing.
• Add Property Insurance
• Add to Umbrella policy insurance"
9. When you’re about 5 days away from closing you should call the utility companies and ask to “Transfer Utilities” for the date of your closing. You may not be able to transfer / turn on water until after you have closed on your home.
10. You should do a “Final Walk Through” of the property you are purchasing within 24 hours before closing to confirm the property is in the same condition that it was in when you agreed to purchase the property and that all inspection required repairs have been completed.
11. On the day of closing, all signers will need to bring their driver’s license or Passport and a Cashiers Check in the amount you are required to bring to closing. Your lender will be the one to give you the amount you will need to bring to closing. The Cashiers Check should be made out to the closing attorney. This is very important.
12. If your name is on the purchase agreement, you will need to be present at the closing or have signed a power of attorney for someone to sign on your behalf. If you are doing a power of attorney, you will need to notify our Client Care Coordinator and your lender at least seven days prior to closing.
13. The day before closing or sometime the day of closing, you should communicate with your lender because they will need to tell you exactly how much you money need to bring to closing. Don’t be alarmed or upset if you receive this number the day of closing or even an hour or two before closing. This is very common. For whatever reason, the banks often wait until the last minute to get their paperwork to the closing attorney and to their gather final numbers. It’s not your lenders fault; there is a lot of coordination in the final hours between Closing Attorney and lender preparing all of the documentation and Closing Disclosure Statement.
14. Closings are typically done Monday through Friday between 9:00 a.m. and 5:00 P.M. The closing should around 1 hour depending on if everyone is on time and whether or not the loan funds right away. We recommend that you plan at least a 3 hour window for closing in case there are any unforeseen delays. If this is a late closing say 3:00 or later, there is a very good chance it will not fund until the next day. If this happens you may NOT get keys at that time and will have to wait until the loan funds and the Closing Attorney receives the funds.

What to check the day before closing

1. Call the closing agent to confirm the date and location of the closing
2. Request a preliminary or final closing statement if there is one
3. Review closing figures for any mistakes
4. Confirm insurance, deeds, trust deeds, and mortgage documents are correct
5. You should do a “Final Walk Through” of the property you are purchasing within 24 hours before closing to confirm the property is in the same condition that it was in when you agreed to purchase the property and that all inspection required repairs have been completed.

After Closing

1. Check property insurance (check policy documents, billing and auto-pay
2. Confirm addition to Umbrella policy insurance
3. Check on Title Registration, Taxes, Insurance and Home Warranty - 30 days after closing
4. If leasing, then set up a "Landlord" account which defaults to you to avoid hooking up utilities fees between tenants
5. Inform tenants to make checks to you from now on

TOMORROW :"From W2 to Financial Freedom via Real Estate Investing" Meetup - Thu 4/21 6:00PM at Quest Trust offices.

Main thematic: "Return to Basics. Advance to FIRE".

12 Reasons to be there:

• We'll divulge THE SECRET of real estate investing.
• We'll give you the steps to START in RE investing.
• We'll share how you can find more INFORMATION and education than you can absorb and where you can get all your questions answered.
• We'll show you how to SAVE 10's of thousands in RE education. No guru needed!
• We'll teach you about the FREEDOM NUMBER.
• We'll teach you how to track your position on, and how to climb the WEALTH LADDER!
• We'll give you the steps to advance towards FIRE and be SET FOR LIFE!
• There will be a raffle with PRIZES!
• If you bring a friend, you'll get a BONUS!
• If you bring your questions, you'll get another BONUS.
• There will be a virtual BONUS, a Speed BONUS and a Surprise BONUS.
• There will be hula-hoop dancers and aerial acrobatics. J/K. After all these, do you still need a 12th reason to be there?

Cheers!

Costin & Bill

Reminder: The keys to Financial Freedom await! Do not miss it tomorrow!

Mark your calendars: next "From W2 to Financial Freedom via Real Estate Investing" Meetup is on Thu 4/21 6PM at Quest Trust offices.

Main thematic: "Return to Basics". More agenda details soon to come.

Cheers!

Costin & Bill

If you don't have all the money in the world, you are probably looking for money to invest in your real estate deals. In our meeting on Thursday, April 7, 2022, Bill Crider will talk on "How to find money to invest in Real Estate." He will also cover "How to make lenders want to lend to you."

Of course, we will also have time for borrowers and lenders to mingle and talk deals. Come prepared to pitch your deals if you are a borrower, or to share your lending requirements if you are a lender.

There will be lenders at the meeting prepared to lend on both small and large deals, so come and get a conversation started and a relationship rolling!

We meet at 6:00 Thursday April 7 at Quest Trust Company, 100 Anderson Lane in Austin, TX. Our meetings are monthly on the first Thursday of every month.

@Account Closed - sorry, at this time we do not have the means to to broadcast online the events. I'll look into recording and/or broadcasting the events if possible.

If you had access to all the money you ever needed to invest in real estate, what would you do?
How many deals could you do in a year if you had a rich relative who said "I'll loan you all the money you need for any good deal"?
How much money could you make if you had a trustworthy friend who said "I'll partner with you and bring in the cash for any good deal"?

At the Austin Private Lenders and Borrowers Networking MeetUp on Thursday April 7, 2022 6:00PM we are going to share with you how you can establish relationships with private lenders who will do exactly that!


If you are a private lender, you can come and meet potential borrowers who are looking for people like you!
If you are an investor or want to be an investor, you can come and learn how to establish relationships with private lenders.


This meeting is designed to facilitate face-to-face contact so you can meet and create the kind of financial relationships you have been looking for.


The topic this month is "How to make Private Lenders Want to Lend to You"


We meet Thursday April 7, 2022 6:00PM at Quest Trust Company, 100 Anderson Lane in Austin, Texas.

Bill & Costin