All Forum Posts by: Dan Durusky

Hi all,

I know this gets asked a lot. I think I know the answer, but I'd like to run it by you all. We don't necessarily need to cash flow, we're just looking to leverage the 2.5% rate and hopefully benefit from appreciation and having someone else finish off this mortgage. We also don't *need* the equity toward the new place, although of course it wouldn't hurt. We've never had a rental property before, but we are handy and I do have some time/energy to put into such a thing.

We have a house in the Boston metro area that's worth around $900k. We refinanced a few years ago and now have a 15yr 2.5% mortgage with 12 years and $320k left. The monthly mortgage is $2700.  Property taxes here around around $10k/yr so around $800/month. There aren't a ton of comps, but from finding what I can, I think rent would be around $4k/mo. maybe up to $5k. 

The problems I see are:

Rent is a low percentage of the house value, so not optimal use of this equity/capital.

Property taxes are high due to the higher house value

My costs would be a baseline of $2700+800 = $3500 plus maintenance, unoccupancy, etc. so basically breaking even cash flow for 12 years

If/when we sell it, we'll owe capital gains tax since we wouldn't have a "new" house to 1031 into. Not sure if/when we'd want to sell it though

But good things are:

Low interest rate so relatively low mortgage payment

Mortgage is paid off in 12 years

Area is likely to appreciate

The house is old (1896 ha), but in solid shape with almost every major system being recently replaced/done over. Heating/AC, appliances, electrical, windows, paint, etc. 

Tax benefits? I need to learn more about this but I think the depreciation would only offset rental income (passive income) right?

Thanks!

Thanks for all the input so far. I've been learning a lot. It seems that besides quitting my job and becoming a Real Estate Professional, the only other way to offset W2 income is through STRs? Interesting. My brother actually bought a STR a couple years ago. The last time I visited him we spent it changing out toilets. haha

I think the advice to get CPA advice is a good one. I might find one for a consult in the near term. I also have questions about our existing income with RSUs, etc. 

Hi all,

My wife and I are high W-2 wage earners. We general follow "boglehead" philosophy and have a lean mean investment portfolio and live well below our means. One first world problem we have is earning a high income with none of the tax advantages of owning a business or real estate as income. 

We're considering adding more real estate exposure to our portfolio and potentially as away to bring in income with some tax breaks. We're leaning toward more passive types, possibly syndication or crowdfunding to start learning the ropes. It seems most/all syndications are K-1 income so you can include depreciation. Some of the easier buttons, like fundthatflip for example, provides 1099-int income so it's just ordinary income with no advantage. The disadvantage of crowdsourcing I believe is that you can't leverage it.

We could consider an actual real estate property, but we live in Boston where prices are insane so we'd be looking out of state. OOS combined with being a first timer seems a bit daunting. The good news is that I do have the time, energy, and ability to dive down this hole and learn a lot. That's the most fun thing in life!

This post makes less sense than I hoped it would. I guess I'm looking for advice on potentially passive investment deals that provide some tax benefit. If that isn't reasonable, perhaps I'll start considering more active options. Thanks!