All Forum Posts by: Andrew Reyes

@Suzanne Player hosts a meetup in Manhasset with at least one wholesaler in the group. 

Real Estate Rocks Investing Group | Meetup

Hi Dave - I find myself to be more of a long-term appreciation focused person. How do you think the value of mobile homes hold up over time? I see the upside in owning a park - the land values are likely to increase over time if in quality areas but what about the homes themselves?

Investing in individual homes feels more like an arbitrage play where you need net income to exceed lot rent to earn a cash flow.

Hi Larry - What market are you in? Barbara Corcoran recently discussed a property she acquired in a trailer park in CA. She mentioned that the location of the lot (on the water, etc.) was most important for her.

Best luck! I look forward to hearing updates!

Barbara Corcoran — How She Turned $1,000 into a $5B+ Empire: PR Stunts, Sales Techniques, Critical Early Wins, Fighting Trump, and Becoming a Real Estate Mogul (#725) - The Blog of Author Tim Ferriss

Thank you, Bonnie!

Lahiru - Link below is a great article covering this topic. Note that using a spouse's hours can help you meet the material participation requirements. However, as the owner you still need to spend more than 50% of personal services and more than 750 hours on the real estate business on your own.

Alternatively, short-term rentals are generally treated as active business income and therefore are eligible to offset w-2 income.

Navigating the Real Estate Professional Rules

"When measuring material participation, a married taxpayer is required to count any hours performed by his or her spouse, even if the spouse does not own an interest in the business or if no joint return is filed.32 While this rule is advantageous because it makes it more likely the taxpayer materially participates in the real property trade or business, it is a trap for the unwary in the real estate professional context, as discussed below in Step 3."

"Step 3: Total the Hours From Real Property Trades or Businesses in Which the Taxpayer Materially Participates

Next, the taxpayer totals the hours spent in those real property trades or businesses in which the taxpayer materially participates. The statute makes clear, however, that while a married taxpayer includes the hours of his or her spouse in determining whether the taxpayer materially participates in a real property trade or business, the taxpayer must pass the two quantitative tests of Sec. 469(c)(7)(B) using only his or her own hours.35"

I look forward to hearing updates, best of luck!

I look forward to hearing updates! Even if in 19 years when you retire.

Hi Shawn - thank you for the encouragement. I am surprised to hear that LTR are huge in Montclair. It seems like such a owner occupied neighborhood.

Hi Mark - Rental properties are generally tax efficient investments (i.e., depreciation offsets current cash flow and defers income recognition until disposition) and so are the retirement accounts (tax paid in retirement when distributed) so the tax burden on the money you are borrowing is likely not to materialize for many years.

The delta between the 9.5% interest rate and 8.3% average return on the existing retirement account would result in more funds in the account if you take out the loan. The borrowed amount will grow at 9.5% rather than 8.3% if you do not borrow the funds. 

The 15% return on the investment should allow you to repay the loan from the investment. Even if you assume a 30% tax rate on a 15% return you should generate close to 10.5% after-tax return, which is greater than the 9.5% borrowing cost and 8.3% opportunity cost of keeping the funds in the retirement account.

Thank you, David. I know the post was a bit long winded. I did not consider the zoning and cost to convert back at the end to realize any appreciation.