All Forum Posts by: Randy Rodenhouse

I have had properties in Euclid and South Euclid (pretty good), Cleveland Hts (hit and miss, tougher area), Garfield Hts (good), Warrensville Hts (good), Shaker (good, Bedford Hts (good).  Just be aware of the rules wrt rehabbing since some require you to escrow funds for the rehab amount (that is if you are doing rehabs).  

Here's a general guideline:

1. Points Paid for Acquisition of Rental Property: If you paid points to purchase your rental property, generally, you can deduct the entire amount of points in the year of purchase. This deduction is typically claimed on Schedule E of your tax return.
2. Points Paid for Refinancing: If you paid points to refinance your rental property, you usually must deduct the points over the life of the loan. This means you would amortize the points over the term of the loan. For example, if you paid $3,000 in points on a 30-year loan, you would deduct $100 ($3,000 divided by 30 years) per year for 30 years.
3. Points Used for Improvements: If you paid points to improve your rental property, you may be able to deduct the entire amount in the year paid. This assumes that the improvement increases the value of the property, and the points are directly related to those improvements.

Short term capital gains is your ordinary income tax rate and long-term capital gains where you hold the property a year or longer is considered long-term capital gains is in as taxed a lower rate.  The long-term capital gains tax rates are 0 percent, 15 percent and 20 percent, depending on your income and status (single, married, etc).  For example, in 2024 if married filing jointly see table below.

You could also do a 1031 exchange to avoid the taxes completely but have to invest all money into a like kind property of higher value. 

I would try to buy it for the loan balance of roughly 140k since that is around 87% loan to value based on a value of $160,000. The cost for the assumption of $900 and the 2 1/2% would just be added to the loan assumption amount and that would be the total basis.  So $139,383 + $900 + $3500 (3.5%) + repairs =  $143,783 + repairs would be your total.  

A more important question is how much is your PITI payment versus your $1100 a month rent payment (assuming you're going to rent the property) since you want cash flow.

@Michael Moreno. I definitely would not pay down my mortgage since you’re just trapping equity in your house and you may not be able to refinance it back out. Especially if you can make more than the mortgage rate of 4.8%.

@Kirk Roberts. If you don’t do a 1031 exchange, you should definitely try to hold the property for at least one year to get the long-term capital gains tax rate. You may just want to have the sales contingent upon clothing after 1 year.

It is very difficult if you have a W-2 job and for the IRS to consider you as a real estate professional. Nearly impossible. This was the case for me when I was working for a corporation and eventually when I quit and went into real estate full-time, I was able to carry forward that depreciation, and now I am a real estate professional, since I am in it full-time.

If you have the deed to the property titled into your name, and you have no mortgage on the property, then you can get a loan against the property from a Private Lender or possibly a bank. what the after repaired value (ARV) of the property? I may be able to help you, but depends on the situation, the property, etc.

Probably best to buy the property in the trust where your LLC is the beneficiary of that trust. That gives you an anonymity
and asset protection at the same time. It also helps you with due on sale clause since the lender will see it was put into a trust for estate planning purposes.  

Jacob, thanks for sharing that information. I recently read that the ventilation vents are really not a good thing and that if things are properly sealed you really don't need the ventilation vents. I am not sure on how I feel about that but just an FYI.  Unfortunately I can't remember the source of that information.