All Forum Posts by: John Kraakevik

Yes.  I would be interested.  Contact me through private message.  Thanks so much!

I am thinking of selling my rental and was unaware that private insurance was available for flood plains.  If the above resource might contact me, I’d greatly appreciate it.

I couldn't agree more with David's points. The only thing that matters is the cash on cash return. Forget about depreciation as a relevant factor. I personally would not figure any appreciation since, as David pointed out, it's so unpredictable and cyclic. A high quality tenant is essential since you will have to return the property back to rentable condition for your market so make your tenant happy. It's amazing how that personal relationship is so important. I had one tenant for 10 years. That is huge for obviously keeping the vacancy figure low. But there is another critical point which I haven't seen mentioned. In 20 years I have never been able to re-rent a property in less than 2 months. Almost everybody pays the rent or mortgage on the first of the month. So you are guaranteed to lose 1/12 of your income, from your tenant leaves and the next tenant will move in. But wait a minute, you have to get the property up to rentable condition for the current market and so you have to add that cost in as well. Cost of paint, cleaning supplies, a dripping faucet, all those things your best tenant may have lived with and legitimately is not something they have done. Unless you can absolutely do everything yourself, you have to find some handyman who is cheap and available within say 2 weeks. Then it's getting the word out there. If you use a re If he can do it right away, you have to ask why. He's not busy. Why? If he's not busy you may not want him because the good ones will be busy, That's why they've gotten referrals. A realtor will charge you one month's rent or you can find someone yourself. So will he/she be able to find a quality tenant within 2 weeks? It may be possible but you'll pay a month's rent and keep in mind that his goal is to rent the property in as little time as possible with the fewest showings so he is able to make some money. Put escalators in your lease but keep them low. Realize that your goal is to keep the property rented. Obviously, if they can find another property with a better price they'll move out. So I've kept a lookout on Craigslist or the MLS for the current rental prices over the years. Amazingly, I've been able to get a month and a half security deposit. You would be surprised. If the tenant wants the property, they'll figure out how to come up with the money. If they can't, I probably don't want them as a tenant. I've never varied on this over 20 years. It gives the tenant pause for thought in keeping the property up. Dogs are an expense for you so I take a special security deposit for them usually right at lease signing because I don't want to overload too many things upfront. Take pictures before the lease and be absolutely clear about your expectations. Remember that "normal wear and tear" is an expense to you so why should you have to restore the property to its original condition? That is the tenant's responsiblity so make them aware of that. Before and after pictures give proof of what you deduct from return of the security deposit. Schedule a yearly walk through and let them know at the lease signing.

I hope this is helpful.  

Thanks, Lauren, since that significantly affects my timing on the rental.  Obviously moving back would still be advisable to make either the capital gains and/or 1031 work subject to weighing out the cash flow of the property versus the amount paid on the capital gains.  I'll have to figure that out.

 Since the cash flow would be good on my current residence,I might move out for the cash flow and then move back in for the capital gains exclusion without doing the 1031.  Once again it would be balancing out the cash flow with the 121Proration capital gain tax over a shorter period of time to determine which is the best strategy.  With a smaller rental time, I should move back for the 24 months, pay the small capital gains tax for the rental (depending on the benefit of the cash flow) and then use my 500K exclusion which is now lower.

It depends on my life expectancy projections and projections for another real estate cycle.  Right now my exclusion is quite below the 500K.  Am I thinking clearly?  What questions did I forget?  

The referrals would be terrific to evaluate all the options.  Please pm me and thank you so very much for your help.  I really appreciate it.  

John

Thanks for the good list!  Do you have an Excel spreadsheet which might do this? Smile. It sounds a little like quantifying the stock market and I really like "everything else you don't know until you don't know it and wish you did."

It really did help in bringing up some of the don't knows.  

I really do appreciate it, Dave.

Thanks Dave.  I thought my accountant mentioned that but not all accountants are created equal.  

Then my best bet would be to keep the property until the cash flow doesn't work and then do a 1031 exchange.  I know the requirements for the 1031 but have heard that many times it ends up in paying the tax because the replacements are so hard to find.  Is this true?  Would a reverse exchange be better?

What are your fees?  (maybe message me).  When does it not make sense?  I've been thinking of doing this with the rental for years but obviously the cash flow is not in my favor.  We might talk about St. Pete properties as well.  Would rules for combination vacation and rental property be allowed?

Thanks for your help.   I really appreciate it.

The cash flow  on the rental is very good which we plan on using in retirement.  So you would recommend staying there  when the cash flow gets squeezed out by rising property taxes and no depreciation,then take the 2 out of 5 years?

Then what would I do about my present residence since the depreciation/cash flow works even better?  Obviously the same thing.  

So here would be the best strategy then?  Move unto a third property as my principal residence.  Keep all three.  Then rotate to my first rental property which I would then sell using the 2 years when the cash flow is poor.  Move back to the third property, keeping my present residence for the cash flow. Then move back to my present residence when its cash flow goes down, sell it within the 2 out of five years etc.

Does this sound like the optimal strategy for income during retirement?

Twenty years ago, I converted my primary residence into a rental property.  From what I have read, by moving back to the rental, I can only exclude the proportion of time I lived there-ten years of the last 30 years ,to avoid capital gains tax and recaptured depreciation tax.  Can I move back to the house and still claim living there 2 out of the last 5 years to avoid ALL taxes?

I am thinking  also of  converting my present residence into a rental.  Since I refinanced, this property would have a terrific cash flow.  However, I am near retirement age so the homestead exemption and no taxation on capital gains comes into play.  

I am interested in purchasing a third property to build up additional cash flow.  Suggestions anyone?

I hold both properties in a family trust if that is relevant.  

Thanks Jerry.  

My first concern is being only 5 years away as well. Right now I would be looking at acquisitions for cash flow.  This is a business I want to continue into retirement.  The reason I have considered out of state (never on my radar) has strictly been lower purchase prices and higher growth areas.

Mike,

I'm also new to BP.  We've had a property locally for 20 years and have learned a lot about the landlord side.  We've screened and researched tenants for years.  Due to the expense of the Chicago area, San Francisco, East Coast, etc., it seems very, very hard to make the numbers work.  Yet with our experience with tenants, screening can be totally inaccurate. Our best tenants have been the least financially attractive.

My question is two fold.  I am quite scared of investing out of state because of the risks.  How did you get started?  We are five years from retirement, love real estate, and want to expand?  How do we mitigate the risks?

Sorry Lalit.  I'm not sure how to contact people directly yet, particularly those with a lot of experience.