All Forum Posts by: Chaim Rosenstadt

As I understood it, the 1% rule is that a property should rent for 1% of the minimum total purchase price, meaning the minimum costs for making it livable for tenants. Since MI seem to go way beyond minimal furbishing, couldn't one make a case that it potentially would pass the 1% rule? 

@James Miller How does vacancy contribute to a tax  loss (unless we are talking about actual vacancies and not money put aside)

I was asking about money being put aside for vacancy, Capex and such, which as far as I know would be taxable. My question was how people "deduct"/don't pay tax on those expenses.

To provide numbers, again this on a property, but not one I currently own (tenant in place for 1 year so no ads, turnkey so should have low repairs, but I still use 8%).

income 1250$/month

Taxes 177$/month

Insurance 100 $/month

mgmt fees 100$/month

maint 100$/month

Vacancy (not actual money put aside) 125 $/month

Capex 183$/month

mortgage 440$/month of which Interest 4000K/year (330$/month)

monthly expenses:1225$/month

projected net income: 25$/month

@Eamonn McElroy Our current resident country (RC) has a tax agreement with the US, so that only excess tax is paid. Here the tax is 15 %, so if the US rent (on a US based property) is taxed say 10%, we will only have to pay the excess 5 % at resident, but if it's 20 % in the  US, there would be no RC tax.

That being said, for individuals there no tax deductions regarding rental income in RC, so the entire rent is taxable, which means there is almost always more tax to be paid in RC. For a legal entity the tax deductions are similar to the US, in that most (if not all) expenses are deductible but the corp taxes are higher.

@Lance Lvovsky No CPA yet, since no US property yet :) Trying to figure out if/how manageable it is without one, as doing the 1040 so far hasn't been a problem. For now trying to play with some numbers I got from a TK provider, to see if everything makes sense. If it won't add up (at least to something positive)  then yes, a CPA will be put on the "to get" list.

HI

If a us citizen living abroad owns rentals, and fills out schedule E, can foreign taxes on rent be considered part of the TAX expenses column/deducted?

thanks

the interest will decrease with time, but by then maybe capex will start kicking in, but first year/max 4000K/year-333$/month.

The depreciation, if building is only 50 % - 151$/month, if 20% - 60$/month, with interest total 393-484$/month.

Vacancy (10%) 125$/month, and capex 183 $ /month, total 308 $/month, which would leave 85-176 $/month for positive cash flow that isn't taxable,  not a lot and that number only goes down with time. So again worst case scenario, with only 85$/month, most properties (again turnkey) have a bit higher positive cash flow, and the proponents of paying down the loan ASAP, that means the 300 $ of interest will suddenly be taxable.

@Eamonn McElroy My original questions stand, how do people get a tax loss, unless all these properties don't have positive cash flow (85$/month isn't much)?

that the expenses are deductible I know (that's why I said except for capex and vacancy)

@Eamonn McElroy the other income are wages W-2

the mortgage interest is already included in the depreciation (the 630$?)

good point about the building vs land, but how do I find out how much the building it self is worth if the buying price was 100K?

my questions was more if the 630 (or less if only depreciating the building), would be how large the taxable income can be, before tax needs to be paid (ie. anything above the 630 $ is taxable)?

and if there is a tax loss, would it lower my tax on a 1040?

thanks

Hi

using a 100K property as an example (turnkey), with a 25 year loan, 76K, 5.6% p.a. that would mean the first year roughly 4K interest, and the depreciation would be 100k/27.5=3.6K, so total 7.6K - 630 USD/month.

Now did I understand correctly that the 630 $ should taken out against the monthly cashflow without a loan, not including vacancy, capex ? Since pretty much all the other expenses are tax deductible? 

This would leave some 300 odd $ a month I need to pay taxes of (rental income 1250$/month)...so how do people manage to get a tax loss? Or should this also betaken into account?

thanks

well for now we want strong cash flow, so have been thinking about Chicago and Detroit.

How state specific do they get? They differ in interest, down payment or? Also meant fanny may loans not fha.

The goal would be to have cash flow that would provide some financial freedom (or a retirement plan).

Hi

We live in the middle east, and for a few years, we have been wanting to invest in real estate in the US. We have no previous experience what so ever.

The local market is way over priced, with most properties costing many times the average yearly pay. The most "common"  "high return" is semi legal splitting of apartments into units, which gives 5-6 % a year (before expenses).

Now My wife is a US citizen, files her 1040 for a few year, and back in 2016 we tried getting a mortgage, but didn't have a long enough credit history to qualify. Now we are trying again, and looking for a complete deal since we don't have time to take care of everything our selves (6 kids, oldest 10).

What would people suggest? And what kind off financing? So far we have been offered an FHA loan, 20% down an interest rate ~5,625, but a bit unclear if we would qualify. One lender told us we need at least 4 active trade lines??!?

We looked at some investment clubs that offer a complete package (from finding a place, suggestions for lenders, local PM etc.). I realize it might not give as high return if we did it our selves, but it still looks like a preferable deal compared to the local markets.