All Forum Posts by: Devin Keener

I'm new to real estate investing and own one rental and a primary residence. I recently found out about the separation between passive and active incomes and that there are rules about crossing the line on how you can claim passive rental losses against your active W-2 income. 

How is the Adjusted Gross Income calculated to determine if you fall into the $150k bracket? If my wife and I make $170k, would the standard deduction bring us down into the $150k range? I don't really understand how this works. I can't use the standard deduction if I itemize so would I rely on my itemized primary mortgage interest, taxes, 401k contributions, HSA contributions, etc to bring me down to the AGI of 150k and THEN take/tap into the passive deductions? Also since the benefit depreciates from $100k-$150k, what kind of passive loss can I claim against my W-2 income at $150k? (My passive losses for the rental are about $20k/year including the depreciation)

TL:DR - Can someone explain to me how the $150k AGI income rule works when claiming passive losses against active income?

Thanks,

Devin

Thank you!

Hi,

Situation:

   Bought condo in 2019 for $238k and made $10k of repairs over 4 years.

   Rented out the condo (valued at $310k) in 2023 (this year).

Question:

   What would the total value be that I get to depreciate over the next 27.5 years? I am confused if I only get to deduct based     on the original purchase price, or the current value of $310k when I start renting it? Do past repairs come into play anywhere also?

I’d have about $100-$120k depending on how high the over bid is after selling costs. This would be the primary Im selling. I would split the proceeds, half into the new build to lower the payment and half into solid dividend etfs. My main goal is to retire in about 7-10 years (late 30s). I don’t save anything for retirement or emergency funds - just everything straight into dividend index funds for the past 7 years, so I’m really committed to retiring early. I don’t want to stretch myself super thin for a tiny return however on the condo. I don’t know if it makes sense to keep it. Eventually maybe after 10 year it might start giving me a better return but that’s a lot of equity to hold up imo 

In 2019, I purchased a one-bed condo in a very desirable area for 237k. It's worth $330-$350k now. I'm also building a $598k home in the Denver Metro Area that is currently estimated to be valued around $650k at close. 

My condo would only cashflow about $300/month and it's got about $125k in equity in it. The problem is that $300/month seems like nothing to me as a trade off for that $125k in equity. I can make more per month on a stock dividend portfolio with much less capital. I have read the book on real estate investing - and given the rising rates, high home prices, and bid wars, I can't find any other deals to leverage that $125k into in my "farm" area that would make sense unless rents went up 30% overnight. Rental rates just haven't caught up to the equivalent mortgage cost. 

Some things my fiancé and I have thrown around are selling the condo and rolling the equity into the new build and considering that as our first future rental instead (live in it a few years then rent it and buy another home). We could cash flow much more on a home than a one bed condo. We could also just keep the condo and slowly increase the rent and pay down the loan. 

I just don't really know what the right BRRRR method is now that I can't roll that condo equity into any deal that makes sense.

What would the seasoned investor do here?