All Forum Posts by: John Morgan

@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.

@Kyle Kadish

Thank you Kyle for your explanation! Now I’m not worried about passing on my rentals to my kids some day. I like how everything starts over when they inherit them. That way they can just sell them all and move on without getting killed in all the tax on them they’ll owe. 

@Stanley Bronstein

I do all my taxes myself on turbo tax. I didn’t realize 1031s weren’t so good after all. So you either pay taxes on your gains when you sell now or defer it to when you eventually sell. So if I do a 1031 from my one original property to several more over a few decades, I’ll have to go back and figure all the gains and re-capture of depreciation on EVERY property? This seems to be very difficult to figure all this out. If this is the case, I don’t think I’ll ever do another 1031 exchange. I don’t want my kids to have to go through all of this when they inherit all my properties and eventually sell. 

@Frank Chin

Thank you Frank. I did not know you’ll eventually get taxed when you sell properties you’ve done 1031s on. So if my kids inherit these properties I’ve done a chain of 1031s on over 40 years, they’ll have to go back and calculate all the gains and depreciation re-capture over all the years? That sounds very complicated, and time consuming to go through after many years. This makes me not want to do 1031s anymore. And not want to buy more properties. I was hoping once you did a 1031 exchange, the initial property and gains was completely wiped out. This sounds like a paperwork nightmare for my kids some day!

I did a 1031 exchange a couple years ago. It was simple and seamless. I’m thinking about selling the property I bought with it for zero profit. If I sell this house breaking even (due to all the maintenance expenses I’ve had to put in it), will I still owe taxes on my initial investment I did a 1031 exchange on? In other words, if you make a killing on a property and 1031 exchange it, can you sell the new house you buy with the 1031 and not owe any taxes if you break even off it? Is there a time period for the next house you need to hold it for to not pay any of those taxes you saved by doing a 1031 exchange?

@Enyi Ajoku I’m planning on doing the same exact thing. I offered my contractor 50% split on the gains. I told him I would pay him for his crew rehabbing each week. I would add his labor, material, loan costs, utilities etc to the total cost of the house. Also add capital gains from when from the profits when it’s all said and done. And told him if we made decent money together I would keep buying more properties for him to rehab. This gives him an incentive to do it cheap and efficiently. And if he doesn’t make me at least 10k, then I don’t do any more deals. He’s convinced we can partner together and be competitive in flipping vs others who get ripped off by contractors taking advantage of investors. If he has some skin in the game, he’ll be motivated to get it done fast and affordable.

@Mikael Lickteig I just transferred 4 of my bank owned properties over to my newly created LLC last summer. I didn’t tell them or even think about telling them. I’m wondering if my mortgage company will object. Do I need to tell them? My insurance company (Allstate) said they didn’t care if the properties are in my name or the LLC. They said they prefer them being in my name. Not sure if I really needed to form an LLC. I have 6 rentals and figured that would protect me in case something happens.