All Forum Posts by: Dan MacDonald

@Evan Polaski @Basit Siddiqi

Glad I found this thread. I have a similar question as the OP but in the context of a second home (not a straight investment property). My understanding is you cannot have taxable losses on a second home the way you can on an investment property. So in the example above, with $3k PITI and $4k income after rental expenses, and assuming you're in a 35% federal bracket and 5.75% state bracket, you're actually not covering the monthly cost of the property, correct?

And in the case of a second home where you cannot rent it full time, you'll have those additional non-income producing days to bear as well. 

Is your understanding that it would actually be fairly difficult to fully pay for the cost of a second home, when factoring in income taxes?

@Adam D Rinehart can you help me understand how the tax side works on a vacation rental/second home? 

Here's an example scenario-- suppose an example second home mortgage/PITI is $5k/month, and the place can generate $6k/month after cleaning fees/repairs/etc.

I'm trying to understand what is the taxable income. I believe it's not $1k/month, correct? Since you can only deduct a portion of the monthly payment (some interest/taxes/insurance). As in, maybe only $2k of the monthly $5k payment is deductible? In which case you would have like $4k/month in income? And depending on your federal and state rates, you could actually end up losing money in the end due to taxes in an example like this, correct? 

At first I thought the second home/STR model made a lot of sense but I'm worried due to limited deductible expenses that it could actually still end up being a money loser. Am I missing something?

I'm looking into doing a cash out refi on my primary but I'm finding lenders telling me that it's not an option right now (saying cash out refi's have all but stopped since covid). Anyone aware of any lenders/banks doing cash out refi's on primary residences right now?

I haven't. Is that good for land that won't perk? @Mason Hickman

We have an opportunity to buy vacant land in the country that won't perk (for a good price). Have you ever done some kind of rural AirBnb on land like this? I remember seeing an ad a while back on AirBnb for a treehouse type of thing that didn't have a bathroom, I can't remember what they did. Some kind of outhouse concept thing from what I remember.

Any good ideas for making land like this useful?

I meet a lot of sellers who aren't ready to sell today, but who likely will be in the next 6-12 months. I used to try to keep these people on a list to stay in touch with, and hope I that I'm there when the right time comes. Sometimes I would be, but many times I wouldn't and the house would eventually get listed with another agent (after I failed to keep in touch). 

The list has gotten so large though and I'm so busy with day-to-day deals that I need to put a system in place -- beyond periodic phone calls - to stay in front of these people and be there when then time comes.

Have any of you put a process in place that you've found to be successful? Is it a sequence of pre-scripted postcards, emails, etc? 

Any information you can share on your process to effectively capture these deals while minimizing your time spent on them would be greatly appreciated!

Thank you!

Hi all,

I'm looking to mass email real estate agents. Have you purchased lists like this from anyone? Are there any companies you can recommend to provide this info?

Thank you!

Hi Rashad,

I'm an agent in the area but I'm actively looking for rehab projects. Especially if they're in DC.

Please keep my info on hand and hit me up anytime to talk.

Dan

Thanks for the replies everyone.

If I heard everyone correctly, the $385,000 gain will be taxed at the prevailing federal and state rates -- there's no way around that (outside of a 1031 exchange) -- but on top of that, there will be recapture of the amount depreciated while he owned the property. 

So there actually ends up being even more tax owed than what I originally thought was the worst case scenario. Bummer.

I've got client with a question relating to capital gains taxes on the sale of an investment property. If you have any familiarity with capital gains taxes/depreciation please chime in.

He bought a single family house in Virginia in 1980 for about 65,000. It's primarily been a rental property since then. He's now looking to sell it for about 450,000, but he's concerned about his tax liability. Will the entire gain be subject to capital gains taxes? Or can some of it be depreciated, thereby reducing the tax owed? I don't believe any depreciation has been taken before. Yes, I know you are not providing tax or legal advice. Just curious to hear if people think the tax can be reduced and, if so, in what way.