All Forum Posts by: Jiri Vetyska

Quote from @Morgan Painter:

Im just trying to figure out my next move as far as who to talk to so i can get some “solid numbers” and go from there. Im waiting on my CPA to get back with my tax info so he can give me a closer guess on how much capital gains would be. 

Can anyone verify if capital gains on a 2nd home voids after 2 years or will there always be a gains tax no matter when i sell. 

Hi Morgan,

I've exited many investment property deals and never actually used 1031 exchange. As far as I can tell, it's usually a bad idea, because you have very limited time and you either have to buy another property and put all money into it, or into a fund or a syndicated deal but those numbers are usually pretty bad because they know people don't have much choice. 

I wouldn't worry about the taxes that much. I've been playing the so called lazy 1031, which simply means, you sell your property and invest some of the proceeds into another deal and use the depreciation to offset your potential taxes. This way, you can pay off your debts, use the proceeds any way you want and still avoid the tax. Either way, the tax is actually not that concerning.
Also, you cannot easily do 1031 exchange if you've refinanced your loan or took out HELOC, so there's that. It's a hassle. 

Not sure how you have decided on Seattle or Arizona, those are quite two different markets. You'll probably have better cashflow in AZ, but you'll be able to actually build wealth in WA. I'd stay away from city of Seattle, as the crazy policies an registrations are just not investor friendly and it will only get worse. Suburbs surrounding Seattle, on the other hand, is the place to be, with none of the crazy bureaucracy. Many people mentioned Renton, that is where I invest for years and doing great! 

Good Luck!

Welcome to BP, Mallory. I see you are off to a great start! Househacking is the best start, it gives you a lot of experience and most importantly, enables you to save a lot of money for your investing.

Great job Tarl! Looks amazing!

Can somebody clarify the tax implications or advantages of converting a primary residence to a rental and what should be paid attention to early on so as not to pay too much in taxes at a later sale?

Specifically if I buy a house that I spend a lot of money renovating while living there and then at some point later I decide to rent it out. How do I enter the property value for the depreciation purpose? The original at purchase, estimated at time of transfer? Anything to do about the expenses for renovation that I couldn't deduct in earlier years because it was not investment?

Thanks in advance!

Welcome Nicholas! I've also come here from Chicago many years ago and felt exactly the same way. We've started by buying larger home where we could live on one floor and rent the lower floor. It worked well and nicely got us over the recession. It's certainly the easiest way to build equity when you are just starting out.

In King county, you can forget about 1% rule, if you find .5% you'll be in great shape. If you go just south or north of Seattle, you will find nice areas with decent prices, such as Renton, Kent, Des Moines on the south (which I like more than the north with bad traffic and really bad commute) or Bothel, Lynnwood on the north. Further than that, your commute will be a pain.

Welcome Andrea! Any market has opportunities you just have to know how to find them. Multiplexes can be a great way to start, but you'll have a lot of competition and very hard time to cash flow. So unless you just sold a house in SF, you should start looking farther away from the city for something that makes financial sense and is not pure speculation. Good luck!

Welcome Russell! 

There are some big decisions you will have to make now. While east side (along with Seattle) is a very hot market, you will have almost impossible task of finding any property that will cash flow. It's all about speculation that prices will appreciate and rents rise to a level when you can be cash flow positive. This is often the reason why many investors focus on areas where the properties can produce decent cash flow or at least have positive cash flow. 

Rob,

Just a heads up, refi with cash out will be very strict, completely different experience than regular refi. Plus, refinance takes regularly two months.

HELOC on the other hand can be much quicker and you may be able to get much lower rate (which is adjustable, so time it wisely). And 120k is the average amount for HELOC.

Plus always remember use debt wisely, should the economy turn sour again, you'd loose everything.

I also live in Renton, and the rules are most likely the same in King county anywhere, but single family home is for up to 4 unrelated adults.