All Forum Posts by: Kelsey Breedlove

As a CPA it's great to see quality tax pros like Amanda and Brandon out there giving solid and useful advice! Go team go!!

@Josh C. has got it right! Two things I'll add-

1) All the depreciation you've taken in previous years you'll have to "recapture" at a 25% rate. Then the capital gains you typically will only pay 15% rate on. (Assuming you're not in a top tax bracket)

2) In Oklahoma (where I'm based) if you've owned a property for several years you don't have to pay state cap gains tax when you sell. You should definitely check into your state's cap gain regulations and see if there's something similar. 

What if you paid extra on your houses to cut the mortgages down to 15 years. Even if you did this on just a few of them (maybe 1/3), then you would really up your cash flow in only 15 years!

On your first deal, I think you should be cautious. It looks like you've done your homework though! Are there any local realtors you have relationships with, that you could run your property by and get their opinion? Usually the realtors know exactly what price houses can be sold for after the improvements.

@Anthony Wright you're brave for taking on a 1950's fixer-upper!  

For your questions - the difference between a repair and an improvement is basically the definition of the word. A repair is something small that keeps the item in working order -- for example fixing a leaking pipe. A property is improved whenever it undergoes a betterment, adaptation or restoration. It sounds like almost all of your work is going to fall under the improvement category.

You also can't begin taking depreciation on the home until it is ready and available for rent -- until then it's not a working business asset. 

The depreciation timeline is 27.5 years, which you already know. For real estate you take a half year of depreciation the first year of service, no matter if it became available for rent Jan 1 or Dec 31. 

You need to keep all of your receipts, bank statements and credit card statements on file in case of an IRS audit. Put them in a manila folder, write 2016 on it, and file it away. 

It should be pretty straightforward from there. Make sure that you also count your business mileage for all those trips to work on the house and pick up supplies from Lowe's and Office Max -- for 2016 you can take 54 cents per mile!    

This isn't a minimum standard, but something that I practice with my tenants. I have a full time job outside of landlording, so I don't want to be wasting my time on the phone during office hours. I want tenants who are comfortable texting or emailing me. 

I only advertise online (Zillow) and I don't give out my number, so they have to email me right from the start. Usually this is a great way for me to do a little pre-screening too. I ask them to tell me about themselves, who will be living in the home, and when their projected move in date is. The people that email me back and have followed the directions and answered my questions -- those are the people I want!! 

@Wesley W. good point! I hadn't thought of it from that perspective. I'm in Oklahoma so I think we don't have such a hard time with tenant rights as some of you others. But still not something I would want to have to deal with! 

The worst business mistake I see is waiting until 6 months or a year in to get an accountant on board. Make sure you get someone to help you set up your software (I'd recommend QB online to start with), and make sure they get access once a month to do reconciliations and give you the profit and loss.

And ask around for recommendations for an accountant before you sign one on -- the only thing more expensive than a good accountant is a bad one!

Best of luck to you!

My question is (and it looks like I might be in the minority here) -- who cares?

Let me explain. You've vetted your applicant, they have enough income to meet your qualifications, and you have explained the rules and responsibilities of the lease to them. 

If their boyfriend moves in, the tenant that signed the lease is still responsible for paying rent and for any damages done -- whether by the boyfriend or any actual guests. 

Another thought -- are you charging different rent prices for single people versus married couples? If not, then why should one additional person in the house make you tack on $$/mo, other than pique?

Also -- out of honesty I'll admit that I have a clause on my leases that states that I can charge extra for an additional person moving in, and that it's not allowed without an approved application. But I really have it in there just for "in case" situations.

I'm with you @Sarah D.. My current goal in life -- be able to hire out a painter! I could afford it right now, but its something that's so easy that I usually do it myself. Unless it's a REALLY big job, and then I would hire out.