All Forum Posts by: Troy P.

Quote from @Jim K.:

What Kiyosaki is really trying to do is make people question the stock framing of the American dream, a nice house in a nice neighborhood that eats up a ton of your money, much more than some other primary residence would.

This is what I got out of it.  A $900K primary residence is a worse investment than a $250K primary.  Most likely, expenses would cost more (utilities, insurance, taxes, etc.) and more importantly, they would typically not apply any more deductions than our always increasing friend, the standard deduction.  I know there could be a lot more to those numbers, but I agree with others that it's an over-analysis that is not trying to tell you renting is better.

Bump?

Hello all,

I'll start by saying I'm in Louisiana and I'm in contact with an attorney to start the succession process for my mother.  I wanted to gather some opinions on what may be the best way to perform an act of donation after the property is settled.

My mother was remarried and my step-father is still living.  We want him to obtain 100% ownership of the home (mobile home with land and mortgage), but it seems as though I will need to go through the succession process in order to receive a judgement of possession and then donate my interest back to my step father.  My main questions are:

Will the home need to be refinanced/sold after performing an AoD to an existing partial owner?
Is this required to go through a title company?

Any other suggestions, requirements, opinions that you know that may help?

Thank you!

Quote from @Eliott Elias:

If you have owned and occupied your property for at least 2 of the last 5 years, you can avoid paying capital gains taxes on the first $250,000 for single-filers and $500,000 for married people filing jointly.

@Michael Plaks

Thank you all for the advice.  So, since it has to be your primary 2 of the last 5 years, you have to sell and claim within 3 years of moving out.  After 3 years, 100% of cap gains are taxed at your long term rate, is that correct?

It's been difficult to find answers for this specific situation, but I was curious if anyone could answer based on their experience.  I'm not looking for tax advice, but just curious how capital gains are calculated when selling a property that was, for example, your primary residence for 6 years but converted to an investment property the last 1 or 2 years of ownership.  If sold, do you take the calculated capital gains and only apply it to the years it has been a rental, or is the full amount taxed because of its current status?  Thanks.

Quote from @Michael Plaks:

@Troy P.

It seems that your original question was not comparing apples to apples. You might have been implying comparing being a passive investor (K-1) versus being a private money lender (1099-INT). These scenarios are hardly comparable. In the former scenario, you share the results of the syndication performance, both good and bad, and both are technically unlimited. In the latter, you have a guaranteed (up to the project's solvency) but limited return on your money.

Tax-wise, talking about K-1s as losses is a skewed view. First, there're a lot of different projects with completely different business plans and tax consequences. For the tax consequences of common value-add apartment complex syndications, read this: https://www.biggerpockets.com/... and this: https://www.biggerpockets.com/...

 Wow, these are some very informative posts..  thank you for sharing!

@Henry Clark sorry for any confusion.  I'm referring to being an LP in a syndicated deal.  Is it common to have a relatively low risk asset or asset group that is cash flowing from the beginning and end up with a massive tax liability?  I'm trying to understand what to expect and how to work that into my analysis.  I understand it all depends, but with a vetted sponsor who has a very good track record, what are the most typical scenarios after receiving a K-1?  Net loss?  Net gain with not enough cash to cover the bill?  I was mostly just curious how an ideal scenario plays out and what, if any, worst case scenarios may play into the deal...

Quote from @Henry Clark:

Laissez bon temps rouler

K1 versus 1099.   Google for more in depth.

What perspective are each of you approaching the comparison?  
Legal, management control, taxes, cash flow, liability, etc.   

Let’s take your paper loss point but reverse it.  Let’s say you earn $50,000 on your K1.   How will you pay the taxes?  Where will you get the cash?

Stop by and say hello to Mike for me.  What number is he?

Geaux Tigers!  We're on Mike VII now for the past few years and he's been quite entertaining.

Yeah, you'll have to excuse my ignorance as I'm working on my first syndication partnership.  My impression is a K-1 is usually more desirable since it allows you to deduct paper losses.  I understand if you receive no distributions, then you are stuck with a tax bill with no cash from that income.  It sounds like any other real estate deal though.  If you rent a home, collect rent, have little cash flow and not enough deductions to break even, you are stuck with a tax bill.  It sounds like you are putting your tax liability in the hands of the GPs, but that is also understood ahead of time.

On the other hand, you can receive a 1099 from interest, pref rate cash flow, etc., and always have the income available for the tax bill.  Am I comparing this accurately?  I understand how the two are used, but my question is when is a K-1 considered good or bad?  It should always show both income and deductions.  Does it all come down to consistent vs paused distributions?  Your "income" will still be reported even though you were given no distributions?

Is it possible to get a contractor in that can replace the drywall, baseboard, and paint for less than 1K?  If so, I'd do that.  Avoid insurance and save everyone money.  You can even get someone to give you a free mold inspection.  This doesn't sound like a major job and you could just be overthinking it.

Quote from @Nathan Gesner:

Quote from @Troy P.:

I disagree. Incremental increases are more likely to create confusion, result in late/unpaid rent, create animosity, and in the end the tenant may not be able to afford it and will stop paying rent, break the lease, or cause other problems.

The best practice is to move them out, clean the place up, and rent it at market rate to a Tenant that is well qualified on day one. 

I understand your point and it's not a bad idea, but it almost guarantees vacancy.  They shouldn't be removed from their home due to the landlord and PM's mismanagement.  I think it depends on how well you know the tenants.  Increasing halfway to market rate next year, then full or just below market the following year could potentially leave them in place, you keep your good tenants, and they get away with thousands of free dollars.  If not, it gives them a year to figure out if they can actually afford it.  If they leave sooner, great.  You get to raise rent sooner.  At least give them an option.  Give them a chance to keep their home they've known for 12 years, but at least be fair about it.