All Forum Posts by: Demjan Van Der Kach

Great points, Michael. Yes, the depreciation was calculated for 80% improvements value. 

Hello fellow investors!

I have a question for those who experienced the following scenario (I apologize for the oversimplification and numbers clutter):

I bought SFH rental for 300K with conventional 20 year fixed 3.75% a few years ago with 60K down payment. Now the property is worth 475K. The mortgage balance is roughly 190K. I would like to cash out refinance and take out 150K cash to put into the new deals. I am offered the new mortgage at 75%LTV (356K) at 4% fixed 30 years. Here are two questions:

- If I invest 150K cash I pooled out from my above-mentioned rental and use it for two more rentals with the down payment, say, 75K each and assume I get the mortgage 80%LTV fixed 4% 30 years can I still fully deduct the mortgage interest from all the rentals?

- can my depreciation to be increased in the cashed out rental (my initial depreciation was calculated 240K/27.5) to 356K/27.5 per annum based on higher appraisal?

Thank you

Hello fellow investors!

I have a question for those who experienced the following scenario (I apologize for the oversimplification and numbers clutter):

I bought SFH rental for 300K with conventional 20 year fixed 3.75% a few years ago with 60K down payment. Now the property is worth 475K. The mortgage balance is roughly 190K. I would like to cash out refinance and take out 150K cash to put into the new deals. I am offered the new mortgage at 75%LTV (356K) at 4% fixed 30 years. Here are two questions:

- If I invest 150K cash I pooled out from my above-mentioned rental and use it for two more rentals with the down payment, say, 75K each and assume I get the mortgage 80%LTV fixed 4% 30 years can I still fully deduct the mortgage interest from all the rentals?

- can my depreciation to be increased in the cashed out rental (my initial depreciation was calculated 240K/27.5) to 356K/27.5 per annum based on higher appraisal?

Thank you

Here is the brochure I am about to start reading:

https://www.irs.gov/pub/irs-pd...

And here is a clear PowerPoint presentation that should answer your question:

https://www.irs.gov/pub/irs-ut...

Thank you folks for excellent points and primary vs secondary goals...

Thanks for the great points. Looks like I have the opportunity to invest as a partner into the real estate and get K1s (Or other passive income streams) and offset that income by depreciation from my rentals. That helps.

The other option I was considering to convert my retirement funds into Self directed Roth IRA LLC and use this tax deferred strategy as part of my future real estate portfolio for, say, BRRRs...

Hey folks,

Would really appreciate some ideas from the forum CPA's, tax lawyers. My wife and myself are having full time jobs and work 50-70 hrs a week each that puts us in 35% pus federal tax brackets. I really like real estate investing and made a decision to move from casual investor to the pro and make REI my second major activity besides the W2 job. I would like to acquire a bunch of properties and use depreciation aggressively with cost aggregation studies etc... but my CPA says there are passive activity loss rules where losses carry forward until the property is sold... Not good enough. What are the ways to function so I could use depreciation to offset my crazy tax bills from the w2 job? 750 hrs of activity in real estate? is it the only option? 750 hrs is almost 20 weeks of full time job... :( I guess, for the love of real estate investing, I can work additional 3 hrs a day (21 hrs a week) which is going to put me on the crazy schedule first 2-5 years and later scale down on my w2 job when business is more established. How many hours would be judged reasonable by IRS to use the depreciation against my W2 income? Again, I appreciate your comments, advice. PM me if you prefer so. Love the forum! Thanks.

Hi! I am doing my due diligence on vacation rentals in Phoenix/Scottsdale market and would be interested to know as many opinions and experiences as I can get. I came across many small operators and bigger companies. Vacasa Arizona, Manor shares, wanderjaunt.... what to expect in the bottom line? 25-30% management fee seems to be quite a lot. I am inclined to go with bigger company and go from there. I hope the customer service woild be personolized enough and their resourses would be benecicial. The downside there is a contract and steeper management fees. What would you choose and please PM me your recommendations. Thanks!

Great info. I wish I could get inexpensive houses here in Phoenix metro... Don't want to have an excuse though... :)

I consider to try 20% down 15 year fixed 6%, no points or 20% down 30 year fixed 7%, no points, the listing price will be bumped to 239K for this seller-financed option. I hope the condo would sell without carry back need... but am willing to try this alternative. Any comments?

I wonder how you guys do your paperwork? does the title, agent and MLO take care of everything for you? Do you involve an attorney in the process? Do you have a custom seller financing package or like to use?

Are the closing costs less when going the seller financed route? Just to be clear - my goal is not to save money if quality and liability would be compromised.

@Bob Malecki thanks for the reference. It was a good piece of knowledge. I don't see the problem to be compliant with TILA HPML Escrow Rule, do you? It actually makes a good papertrail... also this condo probably won't require insurance premium payment. I am going to double - check. I wonder if the buyer will have compliance issues with escrow what can I do in that situation?

Big thanks for the great info.

I am inclined to just sell. My CPA said my taxes on the sale would be only 8K (previous passive losses with my real estate portfolio). 

I just want to understand realistic comparison of reg sale vs reasonable and maybe more attractive seller financing structuring taking into account future short/intermediate term interest rate trends and Time value of money (that I am a fan of learning more).

As a side note, being a health care professional I am amazed and always puzzled by financing and real estate. This condo scenarios with many subscenarios including taxes and different risks makes this decision overwhelmenly complex. It makes me really enjoy learning about real estate, financing, lending et cetera. Reading books is not enough to feel comfortable doing this type of deals and I strongly consider seller-financing to have my feet wet in this real case if it makes sense.

@Andy Mirza The condo complex is not FHA approved. It was confirmed. Planning to use MLO, meetup with a lending attorney. I hope the seller financing would increase my buyer list options.

@Czarina Harris Yes, Czarina, I would like to be very realistic with my terms. My guess one option would be to find a local real estate agent who is well versed in seller financing and understands local Phoenix market. At the same time I want to find answers on taxes of installment payments with seller financing. As I mentioned before  - just selling - is a great tax deal for me. What are prevalent deal structure in your area on seller financed deals: amount of downpayment and amount of notes, and their terms? 

My goal (considering TVM principles) to get my money back within 5-10 years and for net present value to be better than selling and putting the cash in a conservative portfolio of stocks/bonds - which would be for me: 25% stocks/65% diversified bonds/10% cash or something of that nature yielding 3-4% after tax.

My challenge still.... is the math and comparative analysis with different seller financing structuring. 

At this point I like the idea of shorter term loans with downpayment of at least 20% and 8-8.5%. I would definetely hold the note for few years if the math (that I am going to nail down!:)) makes sence. So, my guess the good math (IRR) with consideration of different risks and reacting to actual changes in the economy and interest rates would determine my future actions. I would like to be flexible with my options holding the note in the future. I would bet on buyer refinancing and sending me a nice check (if interest rates won't skyrocket)...:)

@Bob Malecki thanks Bob. I will keep it in mind. The usury laws in Arizona - 10% cap... well, that is what on the surface at least.

Btw, could you tell me more what you mean by "Also be sure to have both taxes and insurance escrowed to avoid a high price mortgage loan". My guess it is related to owner occupied regulations, ability to pay type of thing??

Love your feedback!