All Forum Posts by: Mike Masland

@Ali Boone

Hi Ali,

About an hour away. Curious, what software do you use to scout for deals?

Looking to get started in purchasing rentals for cash flow— trying to decide on the market. There is one semi-decent area locally but the properties are pricey (DC/Virginia area). I see that some of the best cash flow generators are located in the Midwest. Has anyone ever purchased, rehabbed (if needed), and rented 100% remote? Obviously need a good team. Wondering if it’s viable.

Thoughts? Anyone tried this?

Thanks!

@Lane Kawaoka thank you very much. :) I make some passive income through stock dividends but I assume the real estate depreciation could not be used against that.

Seems like I need auto build and execute a plan to escape from the :( side :p

@Ashish Acharya thank you

Hello,

Noob question on the potential tax benefits of real estate investing.

My wife and I have W2 annual income (dual income family working for large corporations) that puts us in the ~30% marginal tax rate bracket. We would like to start investing in rental properties.

Let’s assume we buy a property that generates around $5k in annual cash flow, but has a depreciation expense of $15k. That means we have a $10k loss on paper that could be used against our marginal tax rate and save us another $3,200/year. Is that right?

Can you really take losses on real estate investments against your W2 income from the corporate world? Could we do this over and over to reduce tax bill further?

Thanks

Mike

Thanks Dave!

Judkins Park

Background

My wife and I have lived in a single family home located in Seattle, WA for the last 4 years. We love it, but need to move. We owe $590k on mortgage and could probably sell the house for $900k so let’s call it ~$260k in equity after fees.

We want to keep the property as a rental (our first) betting on the appreciation of the property over time (location is great for Bellevue/Seattle commutes, neighborhood is receiving significant investment year-after-year, lightrail stop coming in 2 years, grocery store coming, etc). I understand this is risky, but we're willing to accept that. We’ve done the math and are confident we can break-even on cash flow (cover mortgage, insurance, upkeep, prop mgmt fee, etc).

Scenario

'Assuming the property market remains flat, I THINK we can make around 20k/year as we accumulate about $12k/year in principal pay-down and another $8k/year in tax savings (our marginal tax rate is 32%) by maxing out our 25k passive loss allowance for non real estate professionals as per IRS publication 467(c)(7) through a combination of deducting our mortgage interest on the property (we pay about 22k year in interest) and depreciation (1/3 of purchase price was home structure at time of purchase).

Questions

1. 1. Is the ~20k/year assumption correct? (if market is flat and net cash flow is break-even)
2. 2. If we want to cash out, my assumption is that we can cash out up to ~500k tax free (married filing jointly) as long as we do it in the next 3 years (IRS publication 523). Is that right?
3. 3. If we keep the property longer than 3 years and then sell it, can we use a 1031 exchange to avoid cap gains if we want to finance the building of new properties or does 1031 exchange only work for the purchase of existing properties?

Thanks everyone

Does this sound right?