All Forum Posts by: John Morgan

I have a couple tenants in dIfferent propertIes who pay me rent in cash. I’ve had them do work on the properties for free rent without any documentation. Is this a problem? I also pay them to do work on my other rentals for credit off their rent. They are handymen/construction workers and have been a life saver dealing with just about any maIntenance problem that comes up. But my bookkeeping is a little weak. I assume I can just claim less rent collected from them, but not able to write off their labor for the work? Also if I pay someone over $600 for work, do I need a 1099 on them if I claim their work as a tax write off?

Ha ha! Gotta love some people who are all in on real estate or the stock market. I’ve done very well in the stock market over the last 23 years since I’ve been investing. I like that it take only a couple clicks to make some major changes and It‘s not time consuming at all. I also like my run in real estate. It takes a lot more time in real estate to make changes. And time is what it’s all about for me. Less hassles and less time is where I prioritize my lIfe and investments. So I’ll stick with 60-70% of my investments in the stock market thank you. But I’m enjoying the passive income from my rentals at the same time while I wait to retire :)

@Kevin Christensen I’ve been with my wife for 23 years. She was on board with our first rental In 2015 because it was a nightly rental in Branson, Missouri that we could enjoy using with the kids for free on vacations. I started seeing dollar signs in real estate and bought another property 8 months later that was in foreclosure. No matter how much I showed her the value and numbers in real estate, she wasn’t on board. Especially when we had to spend $ on them for typical upkeep. I got hooked and started buying more after I refinanced our prImary home to free up cash. This caused major stress on our marriage even though all six of our properties were cash flowing about 2k/month. All she saw was that they were maintance pigs and took my time. Even a 3 minute phone call with a tenant over a minor maintenance problem drove her nuts. She was definitely not on board with my new hobby. So here’s what I did to keep the peace. I bought her stuff for the house so she could enjoy things immediately and knew not all of our hard earned money was going to our properties. I bought her a new dishwasher and fridge. I bought her a really nice backyard patio with a fire pit and grill. She still didn’t seem to be on board with my rentals, so I bought her a new car. And I’m cheap. I’m that person who takes peanut butter sandwichs to work to save $ on eating out. I’ve never driven a car worth more than $1,000. I’ve always saved money to invest vs wasted it on materialistic things. By spending more money on my wife and kids after diving into the real estate market has saved my marriage. And I don’t do any maintenance work on them. I text someone to go do it and pay them the going rate. If your wife sees you prioritizing family time over rentals, she’ll warm up to the idea when you show her the numbers coming in over time. Don’t discount her opposition to this. I did and regret it. She kept telling me “This isn’t normal. I didn’t grow up like this where my parents bought a bunch of houses. I don’t feel comfortable taking on all this debt and spending large amounts of money fixing these properties.” I would recommend going slow. Maybe one property a year. I bought 4 in one year and really upset her by doing this. Slow down and respect her feelings. If she wants more “things” and family time, then honor that the best way you can.

@Tim Kaminski I used a couple HELOCS to buy my first two properties 4 years ago and recommend it. I scrounged up cash and combined it with my HELOC money to pay cash for these two properties. I paid off the HELOCs within a year and a half and was cash flowing good coin. I sold one after 18 months and 1031d it to buy a 225k SFH and cash flow $450/month off it now. HELOCs opened some doors for me to get started. Cash offers got me these deals. Without a HELOC I wouldn’t have gotten these deals.

@Alex Lupo I started 4 years ago with a SFH. I added 5 more properties since then. And find all my tenants seem to be “lifers” in my properties. I stayed away from multi family units due to potential higher turnover rates. My tenants are lower income people with rent in the $1,300/month range and tell me they don’t want to ever move again.

@Alec McGinn I use them to my advantage and have an 800 credit score which seems to keep lenders happy. I pay off my balance every month and enjoy the 2% cash back or hotel points for free travel. I just opened a new account that gives me up to 15k balance with zero interest for a year. I’m doing a rehab and might need to carry a balance for a few months until I get it my cash reserves up. It’s free loans basically if you use them right. And they pay you to use them! A win win.

@Ashish Acharya

Thank you. That’s what I thought. But I came across something that said only the sales tax which threw me off. 

How do you know what is considered an improvement vs fix? For example, I ended up remodeling a shower/bath tub because the tub was rusting out. I would assume this would fall under improvement. How many years does this get deducted over? 5 years? The cost divided by the years? But then this depreciation write off will be recaptured once I sell if I don’t do a 1031..correct?

If you buy $100 worth of sheet rock for your rental property and the tax is $8, how much can you write off on your taxes? The whole $108 or just the $8 in taxes? I assumed the whole $108 amount since it was building materials. But I just read you can only deduct the $8 in tax. Doesn’t seem right.

@Sam Hoesch I wish I had a dime for everyone saying they’ll wait on the real estate market to correct so they can snag a great deal. I waited on the sidelines for several years for prIces to drop, only seeing the market leaving me behind. I finally jumped in on it in 2015. Then grabbed 5 more last year assuming that it wasn’t going to correct any time soon. As long as the economy is on fire and people have jobs, it’ll keep steamrolling ahead. I don’t see the economy slowing down in the next several years. Businesses are making good profits and consumer confidence is at an all time high. Just look at the holiday spending this year. It’s a good time to jump in on real estate.

@Rahul Sunkavalli I always put as much as I could in my wIfe‘s and my Roth IRAs. Mainly for emergency $ or if I decided I wanted to pull out what I put in it to buy something bIg. Four years ago we bought our fIrst real estate property with 62k I pulled out of our Roth IRAs. I only pulled out the basis so I wasn’t taxed one cent off it. I used this money as well as cash from savings and home equity loan to make a cash offer on a rental house for 130k. It’s worth 200k now and we use it as a nightly rental. By saving as much as we could in our Roth IRAs over the years gave us the opportunity to get into the real estate game. And since then we’ve acquired 6 rental properties.