All Forum Posts by: Anthony Dooley

My wife and I are considering moving to Nevada within the next few years.  I would like to hear from buy/hold investors of any potential pitfalls ( taxes, insurance, restrictions, etc) of building a rental property portfolio in Nevada. Thanks

I only know U.S.A stuff, and I only recently learned that most people claim depreciation incorrectly on their taxes. Land and Improvements is not broken down far enough.  Land isn't depreciated, but improvements can be broken down by the building, personal property, and improvements (separate from the building). For example: A commercial building with a parking lot.  The parking lot adds value to the land (improvement) separately from the building.

Capital gains taxes do not apply to a flip, but if you own the property for longer than a year (which I recommend) capital gains applies because that is not a flip.  Maybe in your state, but where I'm from, passive investment income is not subject to FICA or Medicare taxes, only income minus depreciation, taxes, and expenses. The trick to the original question is the $25K limit.  Learn the rules and stay out of trouble. This is not the forum for legal advice.

I see. I would talk to a CPA about it because it is complicated. I am pretty sure it would still be their primary residence even with renting out a room.

In real estate terms, yes it is a fixture. So is the chandelier.  In tax language, it is personal property.  Personal property are things such as the stove, dishwasher, refrigerator, floor coverings, etc.  the value of these things are depreciated separately from the house and separately from property improvements such as a privacy fence or a barn.  I hope that helps.

If I can't net 10% ROI, it's not worth my time. I think the answer you will find is to invest in markets that you know. Most investors will say their market is best because they know their market and they are comfortable in it. I like the SEC states because there is a huge rental market. Taxes, insurance, and labor costs for repairs are inexpensive compared to CA markets. Bottom Line: the best market to invest in is the market that you know best.

The furnace should be able to be depreciated over 5 years as personal property.  20% of the cost is depreciated for the first year.  I cannot speak to which form or schedule. I hope that was helpful.

Let's not get confused here.  It is either your primary residence or it is an investment property.  @Kirk Chow, you cannot depreciate your primary residence, so it isn't a choice of deduction vs depreciation.  You can deduct interest from your mortgage of your primary residence.  You can depreciate the building, improvements, and personal property of an investment property.  Each have different rules, which are too complex for this forum, so consult a CPA. 

@Diane Tian, you do not pay capital gains taxes when selling a property that was your primary residence for 2 of the last 5 years.  This does not apply to investment property.  When you sell investment property, you will pay capital ga

ins on profits from the sale.  All of the depreciation that you claimed lowers your basis in the property, which can possibly increase your taxes.  This can all be avoided by using a 1031 exchange, which must be handled by a knowledgeable attorney prior to the sale of the property.

If any of that was not clear, I apologize.

Your return on investment (ROI) is calculated using the net operating income (NOI). This will be the same regardless of financing or if you paid cash. I use this to evaluate how good the deal it. Then you factor debt service, like Brett said, because it will be different depending on your financing. The financing could turn a good deal into a great deal for cash on cash return.

I am not a CPA, but I know a few things about taxes.  You cannot depreciate your primary residence. You can deduct mortgage interest and certain home improvements that save energy.  Investment property is depreciated over 27.5 years for the home, 15 years for improvements (fence, in ground pool, landscaping, etc), and 5 years for personal property (stove, refrigerator, dishwasher, etc) You can't depreciate the land value. The trick is to minimize the value of the land and maximize the value of the other categories.  Totaled together to equal the appraised or market value. This depreciation can shield some of  the rental income from taxes.  Talk to your tax preparer about these things. Good luck.