All Forum Posts by: Account Closed

@Dave Toelkes Thanks for a very detailed response. Very helpful! I'll send this to my CPA for reference.

Have a nice weekend!

@Dave Toelkes Thanks for the very detailed reply.

If I report on schedule E as three different properties, my understanding is that I should only claim one third of the depreciation on each of the two rental units, but not the one I'm occupying. Is this correct?

Just to confirm, I read in other places in the forum that if I occupy the property for at least 2 years, I could still sell without being taxed on any gains in the property as long as it is below the $250K limit. However, I will be taxed on the total depreciation I took at 25%?

Also, in this case, will you use 27.5% years? Also, how will I estimate the cost of the land vs the cost of the improvement (the building)?

Many thanks!

@Naseer Khan  I noticed you've answered several questions about depreciation recapture in this forum, so I wanted to ask: Do you know what's the recommendation for multi units that are also owner occupied? I am occupying one unit in my property and I'm renting out the other two.I'm reporting the rental income and expenses on my tax returns. Is it recommended to claim the depreciation expense on the two rental units? If so, how would the amount be calculated?

I'm planning to keep this property as a very long term investment, but in case of a sale, will I be taxed at 25% on the depreciation recapture?

Will the depreciation decrease my base, even though it is also a primary residence?

Much appreciated!

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Thanks @Stephanie Medellin!

Thanks Mike! Appreciate the detailed answer and the info about investment property interest rate.

For your information, I was advised that investment properties could be purchased with 20% rather than 25% down, but the rate would be half a point higher. This can be a good solution for those who have less cash to start with, but where the property income can support an 80%, rather than a 75% Loan.

Closing costs: In my area, are no more than 4% of the loan amount. Was assuming 2% seller's concession (which is the max allowed for investment properties in the NE). Therefore only 2% of the loan amount needed in cash for closing. $100K down+ 2% of the $400K loan  = $108K. Let's make is $110K since the loan is actually slightly higher with a purchase price of $508K including the seller's concession. About $17K reserve is needed for the new property -includes debt, taxes and insurance. AND about $21K is the 6 months reserve on my existing property - so this is how I got to $40K. Bank wants to see that I have reserves for both!

Thanks again for your answer.

Hi All,

Would appreciate any advice on the following.

I own a property (live in + rental) and would like to buy a second in January (investment property - most likely a triplex). The second property is not a commercial property, so the lender will look at my own income, as well as the income generated by the property, to qualify me.

According to a fairly robust calculator I created, I need $150K for DP, closing costs, and to show the lenders 6 months of reserves for mortgage, taxes and insurance for property 1 and property 2.

I missing $40K for my cash goals - this is the 6 months reserve money, not the down payment + closing money! I know I can have that money saved up within a year, but I'd like to buy now. My options are:

1. HELOC on existing property: Already in process with a national lender. The concern there is that they do not understand local conditions and are making the process very difficult and lengthy. If I start again with another lender, I'm concerned about the time to close, bothering my tenants with yet another appraisal, etc. Local lenders in my area do not do HELOCs, only Refis.

2.  Refi / cash out: I can work with a local lender to do that, but really think it's wasteful to spend $20K - $25K on closing costs alone, when all I really need is $40K that can be paid off in one year. Yes, I did the math and know that if I hold property 1 for 30 years, I will end up paying less on a refi than my current payment due to interest rate reduction. However, I don't know I'll hold the property for 30 years.

3. Personal loan: I can get a personal loan fairly quickly from a reputable national lender. The concern here is the seasoning of the funds. I'm not that concerned about the higher interest rate on an unsecured loan, since I know I'll be able to pay off the loan within a year.

Questions:

1. Does anyone know how long funds from a personal loan have had to "season" in my own checking / savings account to be considered my own, so that I can use them as part of the downpayment? Can I use the funds from a personal loan as reserve money if I'm not allowed to use them for the DP?

2. Rate assumptions: I'm assuming that for an excellent credit borrower, a $400K 30 year loan on a $500K property (20% down) would be at a rate no higher than 4.5%.(Again, looking at a triplex, not a commercial property.) Has anyone done a similar deal recently and can give me ideas about the rates?

Advice will be much appreciated! 

Thx.

Thanks everyone. Good ideas and lots to consider. 

I'll keep you posted!

I've owned a small rental property for 18 months now. One of the units is occupied by a low income family: two parents and their two teenage children. These tenants were in place when I purchased the property, and I kept them as month to month tenants without a lease since then. I know I can easily rent out the unit for 40-50% more of what they are paying, and without doing any renovation. I'm pretty sure they will not be able to afford the full market rent if I asked them for more.

Recently I've been thinking about the rent money that I'm giving up on every month. I'd really like the property to earn to its full potential. On the other hand, I'm thinking about the children, and about the fact that housing has become very expensive, so not sure where they could find a reasonably priced apartment if they moved out.

Was anyone ever in a similar situation? How did you deal with it?

PS - Although rent is about a week late every month, it is always paid in full. They keep their apartment and the common area clean. I can say that so far, they have been reasonably good tenants.

Thanks Bob. Will check them out!

Have a nice weekend

David