All Forum Posts by: Basit Siddiqi

@Jacob A.

I think you need to do more than co-buy the property to avoid the inheritence tax. In the sad moment that your she passes - she will still have a 50%(or whatever you guys agree to) interest in the rental property at which point you will inherit and be hit with the inheritence tax.

I think the next step for you guys to do is to create an LLC as Cara has suggested and have your mother gift you LLC shares every year to lower her estate.

You should definitely reach out to an attorney before doing anything though. 

I like Cara's suggestion on taking a loan against your 401K(it seems like your only immediate option at the moment).
I took a 15,000 loan against my 401K to fund my first investment property.

However, you should look into seeing if you can cut out other expenses going forward.

I would also avoid doing a flip for your first project. What happens if you miscalculate the repairs.
What is the original purchase price + repair budget was $30K and it comes out to $50K...you pretty much get screwed at that moment.

@William Brockenshire

it is hard to answer that question without knowing more facts.
What was the issue with the foundation?

Was there a crack and it was fixed up? (hints at a repair)
did the contractor pour a new slab of cement? (hints at capitalizing)
Was a portion of the foundation fixed(hints at a repair)
Was the whole foundation completely replaced?(hints at capitalizing)

Hi @Axy Parikh

Welcome to Biggerpockets!
Congrats on your first rental property!

1) It depends - 
If it is a repair - It is expensed in the current year.
It if is an improvement - it should be capitalized(if the amount is below $2,500 and you make certain elections - it can be currently deducted).

repairs maintain the property
improvements increase the life of the property, increase the value of a property or make the property more efficient.

2) The great thing about real estate is that they allow depreciation.
based on a purchase price of $100,000 where land is allocated $20,000 and the building $80,000 and purchased on January 1st. you would be entitled to a $2900 deduction to net you to $100 of taxable income less any repairs.

Are you managing the property yourself? if not you should factor in the property management fees.

Standard deduction should be looked at separately outside of looking at the income/losses from real estate. But you are entitled to take a standard deduction on top of the expenses named above.

Texas actually does not charge an out of state investor tax.

if you own a property in your personal name in Texas - you won't pay an income tax.

however, you will pay an income tax to CA for your income in Texas.

Normally California will give you a credit for taxes paid to another state(but in this instance since Texas wont charge you a tax - california wont give you a credit.)

I was in Dallas about 6 months ago. Its a great city and it seems like business is still booming

@Brian Whitney

1) You should factor in 10% property management fee.(even if you plan to self manage)
2) I don't have student rentals but I hear that properties can get quite dinged up. Security Deposit should cover the expenses...but I would up the Capex to 10%

Pittsburgh lost a lot of population since the 1960's(White flight + loss of steel jobs). I hear rumors that some back office jobs are coming in.
It is scary reading the student enrollment decline by that much over such a short period.

Your real estate agent is there to act on your behalf in a real estate transaction.
While he/she may have experience/knowledge about real estate; do not let them dictate how much you should offer on the property.

Did she just throw out the $15K decrease in offer price or was there some thought behind it? Did he/she provide you comps or similar properties sold within the past couple of months?

If your gut is indicating to offer lower...offer lower; at the very worst - they will come back at a counter offer.

Have you thought of going on this deal with another member of the group(possibly someone who has done a flip).

If your intentions are to buy, fix and rent out; maybe you can agree to buy out the other person at the end of the fixing process.

I would go the multiple houses route

Hi @David Fawcett

Welcome to Biggerpockets!

Texas is one of the states that does not impose an income tax.

However, the IRS and States tax residents on world-wide income.

As a California resident you would include the income/loss earned from your rental property in Texas.

Furthermore, if you operate as a separate entity(LLC Corp etc) you may be subject to Texas' franchise tax.

More information of the Franchise tax can be found on the website below

https://comptroller.texas.gov/taxes/franchise

What area of Texas are you looking at?

Hey @Jodi Kaili and others.

You may want to list "Salt Lake City" as a keyword alert and see who the big players are in the area; network with them and ask them who they use as a CPA.

If you guys are still having troubles finding a local CPA - You may want to reach out to a CPA who works with clients remotely.

Did you have any tax questions for the time being?

Are you connected with any real estate agents? I think they should be the first set of people to add to your team.