My wife and I are just flirting with the idea of jumping into real estate investing. I am retired and working on career #2. We have three children; two in college, one leaving for college next year. All of their college costs are saved for.

For purposes of context, we have a net income of +/- $525k/year. Income is born from defined benefit retirement pensions ($250k/annually with 3% annual COLA) and the remainder is from W2 employment for my wife and I. We have approximately $475k equity in our primary residence (2.5% rate for 11 more years - $850k value). We have various investments (403b, 457b, Roth IRA's, 529). Other than our home, we have no debt.

Our largest issue (and I understand how fortunate we are so not complaining...too much), is the enormous amount of taxes we pay. We live in California and the income does not allow for many deductions (no deductions for kids, no education deductions, minimal interest on mortgage, etc.). We are looking to begin this process with the primary motivating factor of reducing our tax liability and then creating some generational wealth for our kids. Secondarily, if we can have a year wherein we can significantly decrease our tax liability thought REI, we would use that year to convert some of our tax deferred investments (403b, 457b) to in-plan Roth conversions and pay the taxes on those conversions - hoping that makes sense.

We are open to STR, MTR, LTR - we just want to make a wise decision that lowers our tax liability. While we would like to cashflow at some point, we recognize that is likely downstream. We would like to grow our portfolio as time, finance, and opportunity allow.

Lastly, our oldest is headed to UConn for her PhD (6 years) and instead of paying to rent, our thoughts are to do a version of a house hack with buying a house/condo with her living there and then renting out one to two rooms to offset the costs of her rent. We also have a son that will be going to the University of Arizona and our thoughts, assuming this is a wise choice, is to do the same there. If we have to pay for housing anyway, we might as well make the most of it. We do, however, understand that renting to undergrads comes with a risk of what goes on in an undergrad house. Perhaps my son being one of the tenants will help to mitigate the damage? :)

So I am looking for any advice and/or connection to a CPA/Tax Planning Consultant who is familiar with this space. Not looking for free advice, but reliable advice and an ongoing relationship as we travel this path.

Thank you in advance.

Tim and Kristina

Sacramento, California

6 Votes