All Forum Posts by: Tommy F.

Ammon Gutierrez assuming you're not going into huge debt to fund college, my advice is to finish. You're 22 and have a bright future. A college degree is not a guarantee for anything but it can benefit you now and in the long run. It's much harder to go back and finish a degree after life gets rolling, marriage, kids, bills, etc. There are lots of great posts on BP from which you can learn and build your RE plans. Build your foundation and then execute your plan. All the best!

@Melissa Harris

I'm not quite sure I get your assessment of the situation. If your gross earnings are $100k, let's assume you take the standard deduction and just call $100k your adjusted gross income (AGI), and you file single, then you'll pay $10,452.50 plus 25% of the excess over $75,900 which comes out to $6,025. Your federal tax will be roughly $16,477. https://taxfoundation.org/2017-tax-brackets/

Depending on your State, there could be another 5% to 10% or so.

If you have legitimate expenses to reduce your tax liability meaning you've incurred an expense and paid cash for those expenditures, then reduce your tax liability and report the proper expenses. I don't understand how "not" taking the expense deductions to reduce taxes saves you $20k by reporting "more" income. To whom do you want to report more income? A bank?

@Leo Gonzalez

It doesn't matter which property type (commercial or residential), the numbers will be your guide. If you have nothing but passive activity generators (positive cash flow and taxable income), then your tax strategy may need to include one or more passive activity losses (phantom losses) which are the result of depreciation from other income producing properties. If you get to a point where your passive activity losses exceed your passive activity generators then you'll just have a passive activity loss carryover to the next tax year(s) and they carry forward indefinitely until other passive income can be offset with with the loss carryovers or you dispose your entire interest in the property to a third party through a taxable sale event.

@Leo Gonzalez @Irina Belkofer

You can't pay yourself a salary from a passive income activity - it's passive. Regardless the amount of time you spend on it personally, the IRS considers rental income a passive activity. You may consider paying your child (18 or older) a reasonable and customary management fee to handle calls, collect rents, arrange maintenance, and prepare leases. An arrangement of this nature may accomplish a few things: (1) provide you a deductible expense on your Schedule E, (2) free-up your time, (3) get your kid some experience, (4) get your kid some college tuition that may be tax-free to them assuming their taxable income is less than the standard deduction limit.

Review the IRS rules for passive activity expenses: https://www.irs.gov/publications/p527/ch01.html

@Leo marry your passive income generator (PIG) the low cost duplex with a passive activity loss (PAL) another property that generates a tax loss each year. It's balancing act.

@paul lower it to $1,175 to 1,195 that will reduce your income $300 at most compared to another month of vacancy. $25 per month difference will get you more calls. Good luck.

@marlon Get some free education at your county council meetings and planning board meetings. Free to public to attend. You can watch developers pitch their ideas to the community and see how the negotiations take place.

Ben Kirchner the term I experienced several years ago was "seasoned" landlord and that meant two years of rental income reported on tax returns. The seasoning period gave lenders the comfort level that the borrower knew enough about the business so the lender would consider 75% of the projected income on the next property as part of the income qualifying for the loan. Good luck.

@Adam Craig

You run a real estate business and a separate business you never intended to self-manage. Well, you paid $32k last year to a third party manager. Why not bring the property management in-house under the supervision of your other real estate business? You can find someone to work in-house for $32k to learn the real estate investing business under your guidance and you can have a close eye on what's going on. 

Alternatively, with 23 units you should be able to qualify under IRS rules as Real Estate Professional (REP), if you haven't already done so. If not, self-manage, claim REP status, save $32k, and reap REP benefit of offsetting all RE tax losses with other income to include your spouses W2 income.  Good luck!

@Alex Young

You're 26, have a geology degree, you don't have a bank account, you're parents are controlling and manipulative, among other things in your life. You made the post seeking advice, so I'll chime in with mine although most of the follow-ups pretty much cover all the bases.

I dare say, your parent's "control and manipulation" is tough love for a 26 year old young man whom they want off of their payroll. If you've never had a bank account, that suggests to me that your parents or someone else paid for and supported you through college. You are so far ahead of others financially for those very facts - be grateful.  I'm not taking lightly your depression comments, but could it be a case of you being sick and tired of getting nowhere rather than clinical depression? If that's the case, you need to get motivated. Many books have been recommended in this post, I'd like to add "The Power of Positive Thinking" by Dr. Norman Vincent Peale.

You said "...you'll fake it til [you] make it." You need to be a doer not a faker to succeed. You also stated you've been "...wandering aimlessly and it hasn't paid off..." Advice alert: You can't hit a target you don't have. You can't reach a goal you don't set. If you want some motivation, go visit Marine Corps Recruit Depot San Diego which is located by San Diego Bay and just off I-5. You'll see young men with laser focus, heart, motivation, dedication, and determination.  A short visit to MCRD may transform your thinking. By the way, I'm sure they're hiring. All the best!