All Forum Posts by: Bill B.

I assume the graph is almost useless? Obviously the lowest 20% of income earners own zero real estate. They have a net worth of what $1,000? If anything it should say they “invest” in cars, as that’s probably their largest asset. Unless it’s being distorted by seniors who own their own home. And they don’t own their home to “invest in real estate”. They own it for a free place to stay. 

Ps. It looks like the poor own the 2nd most private businesses. So unless you want to be poor don’t start your own business. 

Pps. Yeah I see it says assets not investments but are you considering who was surveyed? At what age and what location? Senior farmers in the Midwest, college students in NYC, single mothers in Chicago? Were the bottom 20% almost entirely in MS,KY,NM, new border crossing immigrants, and Indian reservations? Or did they mean the bottom 20% in LA? Are they saying don’t invest in what the poor invest in, only what the rich invest in? The people who can afford for an investment to go to zero, lose everything invested and move on to the next one?  

Maybe they should put a map of where all the rich people live so we can move there and become rich. 

Tell me what you want the graph to say and I’ll make one saying it. :-)

Pps. I didn’t mean for this to come off as a “why did you bother posting that.” Post. It was a complaint about the graph and its creators not you Paul. Sorry if it came off that way. 

You're obviously only depreciating and doing the cost segregation on the adu you're renting out, not the entire home/property/purchase price. Correct? You are still renting out the ADU today, and only the ADU correct?

20% sounds almost too high to me. Especially in parts of LA where it could be 80/20 land over all property and then 80/20 for the adu, leaving you closer to 90-10 or 95-5%. Where only 5-10% is depreciable. 

Ps. You’re going to be taxed on the depreciation you could have taken during previous years even if you didn’t. So it might be time to find a new CPA. 

Pps. A cost segregation for just an ADU doesn't seem like it would be worth the cost. Especially in LA. Remember, you're depreciating the cost then, not the replacement cost today. If you tore down the ADU, how much less could you sell for? That's the MAX you could start with.

Yeah. I don’t think you are “in contract” until the earnest money is deposited. 

If they come back and you are desperate/have other offers make their EMD immediately non-refundable before you accept their offer. If you're getting other offers MAYBE roll the dice with them again.

What @Amit M. said. I’ve made 3 claims with Allstate. All 3 times they went after the someone else for the money. (Another driver and the maker of toilet supply lines in another case.)they refunded my deductible in every case, even when they didn’t collect 100% of the loss. 

If you don’t think they will sue the other company and save you the ductuble. Ther is zero chance I would make an insurance claim under $5,000. I assume your deductible is at least $2,500. If it’s not, cases like this are why it should be. 

1) I assume you've checked to make sure STR haven't been or aren't about to be outlawed in the area you're considering. (I know there's been a bunch of noise about outlawing it.)

2) can you just put enough more as a downpayment so you rent will cover it> the interest savings along should make it pay for itself. 

Even at 7% another $45k would drop your payment $300 and make you qualify. It might be a rare situation where taking Roth withdrawals or savings spending would make sense. 

I agree with Drew. It sounds like keeping your current property and using a PM would be a much better deal. Certainly in cashflow and almost certainly in appreciation. Especially if you subtract 10% in selling costs and 20% in taxes. If it’s been more than 2 years keep it. 

To keep the values and the income even close to each other it would probably have to be a 20 unit building or 10 houses. Figure them apartments cost $2-3m, houses cost $2.5-$3.5m, the apartments bring in $20-25k in rent, the houses $25k-$30k. 

In thsi scenario houses win: 

You’d think you’d have 1/2 the turn over. But it will be closer to 10-20%. 
You have zero tenant on tenant conflict, nobody leaving because of shared wall problems  

As mentioned, you can sell one instead of all. You can also do easier 1031 exchanges  

Your buyer will most likely be an owner occupant not another investor looking for a deal  

They are almost guaranteed to appreciate more.

Less chance of 100 vacancy/total disaster from one fire, earthquake, tornado, roof collapse (snow?), major water/mold issue.   

You will likely have almost zero direct competition. (A 2bd/2b 1000sf apartment is closer comparison to any other one, what a particular house to another. )

Easier to get started one house at a time. Easier to wind down. Easier to leave to heirs. 

I understand people might think it’s cooler to own a big building, or it’s the natural progression. But unless your goal is 1,000 units, take the houses. 

If you think it’s worth more than $400 you should definitely pay a CPA or a tax pro, especially if you plan to use the software in future years. Either the software is wrong and you should immediately stop using it. Or it’s right and you’ll know to trust it next time when the tax guy says it’s right. 

Ps. There are situations where an extra $30k in depreciation could result in ZERO tax savings. If you’re not showing any positive net rental income and you have w-2 income you don’t get to write off infinite rental expenses, including depreciation. 

I assume not an owner occupant loan where Dodd-Frank would kick in. 

Other than that it’s hard to see a limit lower than what credit cards charge. 

If you use an attorney to write up the contract I assume they would know?

A simplified version of how I would explain your situation.

1) if it was a rental first it’s always prorated taxes due. Buy a new property, rent it out for a year and then move in for 19 years as your primary. it’s 95% tax free (19/20ths) it doesn’t matter you passed the 2 of 5 years rule  

2) if there’s any rental activity before the 5 year look back period, it’s pro-rated. You buy a new primary , live in it for 8 years. Then you rent it out for 2 years before moving back in to it for 10 years. That’s 90% tax exempt (18/20ths) because there’s rental activity before the 5 year look back period. 

You’re only guaranteed 100% tax free (up to limits) if it’s your primary first and you sell before the 3 year anniversary of it not being your primary home. 

If Micahel corrects anything I said, believe him, he’s an expert. I’m just trying to explain what I believe would occur in your situation. Your CPA should 100% agree with him.