Seeking Advice on Tax Strategies and Pr

[Candi Kham]

Hi everyone,

I'm seeking guidance on navigating the world of real estate investing, particularly in the context of tax optimization. Currently, I find myself in the 37% tax bracket due to W2 income and I'm eager to explore avenues to shelter taxes through real estate investments. I'm specifically interested in acquiring a rental property within the $800k to $1.2M price range in Washington state.

However, upon evaluating rental properties in the current market, I've noticed a concerning trend of negative cash flow. This raises the question: what type of property should I be targeting? Should I consider house hacking to mitigate the negative cash flow, or opt for an older home in a sought-after neighborhood, even if it means breaching cash reserves every month?

I welcome any insights, suggestions, and tax strategies from experienced investors in this forum. Your expertise and advice would be immensely valuable as I embark on this journey into real estate investing. Thank you in advance for your assistance!

[David M.]

@Candi Kham

You looking to use real estate as a tax shelter?  There are plenty of posts looking to do that.  But, You really can't deduct passive losses onto your main 1040, especially since you are in the 37% bracket.  Additionally, you need to have losses to deduct --- that's kinda the opposite of making money.  You can try to use depreciation, but there is only so much, you still have to pay the depreciation back (unless you basically die...)

You should check out these threads basiclaly about high quality vs cash flowing...  I'd stick with high quality.  

https://www.biggerpockets.com/forums/48/topics/1159104-overleveraging-net-worth-cash-flow-and-headache-factor

https://www.biggerpockets.com/forums/52/topics/1159067-less-...

https://www.biggerpockets.com/forums/48/topics/1131066-cash-flow-is-not-king

Its a bunch of reading.  Hope this helps.  Happy to chat.  Good luck.