All Forum Posts by: Abe Heaney

Thank You @Daniel Dietz ...  That explanation was great. Much appreciated. 

Another question related to taxes related to buy and hold.  Assuming you set aside a certain percentage of money from your monthly rents in expectation of capex..  At the end of the year, if you did not spend that money on repairs or improvements I assume that money will get taxed as income.  Am I correct in my assumption?  Are there any strategies to retain that money since it is still assumed that it will be needed and is being held for expected future expenses?    

Thanks all. 

Hello BP Community,

I am new to all of this and I am still in the learning phase of REI. Been reading a lot (rich dad poor dad, etc.) and listening to the Podcasts to try to find which niche would be a good fit for me to start in. Anyways, regarding Buy and Hold I had a question from a tax perspective.

Here are my assumptions:

- You own a single family or a multi family investment and you are currently generating minimal cash flow.  Let's assume you are generating $100 a month after all expenses.

- Every month the mortgage you have on the property is being covered by the rent you are collecting.

So here is my question.

- From a tax perspective, correct me if I am wrong, but isn't the Principal (portion of the mortgage payment) that is being paid (by the rent being collected)  considered as taxable income?

- Is your end of year taxable income on this project the $100 a month (assumed cashflow) plus the principal portion of the mortgage that was paid down throughout the year?

- Are there any strategies that can limit or minimize that tax liability?

Thanks for all your help.  This community is great.

Hi Taylor & Mike,

I was wondering how the journey is going.  I too am looking into getting into Real Estate investing to supplement my 9-5 and hopefully transition into it full time (easier said than done, but we have to get started somewhere).   Let me know if you guys are still pursuing this endeavor.  Just to give you a heads up, Mark S. (who also commented on this thread) set up a meetup in Red Bank at the library for next Wednesday 5/25/2016 at 6:15pm.. Look for it on Meetup.com .  The group name is Central Jersey & Monmouth County Real Estate Investors.