All Forum Posts by: Jon Quijas

Hugo, good job. Where is your rental in Sac located? I have two in San Jose and am looking to purchase a third outside of the Bay. Sac has been on my radar.

Was wondering if you had considered holding it? Yes, that was the original plan. I only make like $700/mos. on it. Will the market support a higher rent? Not at the moment. Could you refinance to get cash for another deal and raise the rent to maintain your cashflow? I already refinanced and borrowed 30,000 to get another property (which my family and I are currently living in). That wound about being a good thing because our primary went up over 200k. We have about 500k in equity between both properties. I only make about $696 a month from rent after I pay everything which is pretty good. There is an HOA which scares me being that there can always be large assessments (I have been pretty lucky so far and I suppose I can always write them off). I was thinking of this: taking my tax free gains, and reinvesting it in states/cities like Indiana where the cap rate and grm are better. I could probably get close to four properties there. I think it would take 6-7 years to recapture my original investment of 200k plus I'd have cash per month coming in. It worries me that I don't know the areas though. Also property Mgmt. 😀 What would you do?

Thanks for your feedback folks. I have plans to sit down and chat with a CPA. Another thing for my financial gurus:

If I sold them home for 500K and I owe like 200K on it, then with a 40,000 (over the last five or so years) Depreciation Recap. (at .25%) I would pay $10,000, correct?

That would mean by the time I am done paying Real estate fees (5%) & Depreciation Recap (10k), I should walk away with close to 265K capital gains tax free?

Also, does that mean I technically have until next spring to sell it and be exempt?

I am thinking of selling in Feb/March of next year.

Yr. 1 (April 2013 - April 2014- Primary)

Y2. 2 (May 2014 - April 2015 - Primary)

Yr. 3 (May 2015 - April 2016 - Rental)

Yr. 4 (May 2016 - April 2017 - Rental)

Yr. 5 (May 2017 - April 2018 - Planning to rent it - May do a month to month and sell earlier)

Natalie,

What if my wife and I eventually retired in it (and we lived in it for let's say 10 years)? Then we eventually sold it? My understanding is that we would have to pay pro rata and would only get part of the profits exempt. The non qualifying portion I would still have to pay taxes on (based on the rate at the time). Then I would have to give back depreciation?

Thank you for your feedback.

Jon

Hey All,

My wife and I are novice investors/landlords and we are both from poor families who have had to work for every single thing we own. I am seeking for some advice/guidance (I will also be meeting with a real estate tax/acct.).

Scenario 1: The market tanked and we were able to purchase condo A for $235,000 in what is now one of the hottest real estate markets in the country: San Jose, CA. It was our first property and it was our primary residence from Sept 2012-April of 2015. Then in May of 2015, we purchased a second property House B (for space). From May 2015-current, we have rented out property A. We make about $700/month and owe about 207,000 on it. Property prices here have gone through the roof and our neighbors house just sold for 510,000. It is my understanding that I have until next year (because it meets the IRC 2 out of the last 5 years criteria) to sell it and walk away without paying capital gains. 

         Questions: 1.) Do I still have to repay the depreciation for the two years that it was rented?

                             2.) Other than a 1031 Exchange, are there any other scenarios where I can not pay my gain taxes?

 Although Google will be moving close to where the condo is, I think prices may appreciate; however, with prices increasing, that means if I ever decide to sell, I would have to take the long term gains hit. Correct? Also, I have to repay the depreciation.

Jeff Pollack my goal is to own several long-term buy and holds properties like duplexes and 4-plexes, eventually getting into smaller apartments. I would like to build my personal business so that eventually in the next 10-15 years I can work for myself. Great advice about the financing not being easy. You confirmed many things that I thought/have heard from others around BP. Every time I visit this topic it doesn't seem wise to get out of the Bay Area properties to go somewhere else. In my short experience, if things are bad here, things are really in the shitter in other places. Thanks for the advice. What would you do? Btw, KC and Indianapolis (also Pittsb) are areas I was wanting to get in to.

@Jerry Padilla Great advice. Yeah, there is no way in hell I am going to be quitting my job any time soon. I am in my early 30s and am an extremely hard worker. Even if what I want to be my reality isn't going to happen for the next 10 years-15 years, I am ok with that. Right now I am trying to be strategic. My wife and I came from  nothing, not even having money for our first condo down payment. Knowing SJ prices, when the market took a tank, we took out loans for the down payment and knew that was our opportunity. The first one we bought was a complete dump in the Willow Glen/Downtown neighborhood. It is now gorgeous. Working a 9-5 and then coming home and working on the condo until 10 at night nearly killed me. I like the Refi idea. 

@Ryan Landis I am going to have to crunch the numbers. I like being locked in at the 3.5%. 4% may not be bad if we can get rid of debt, and buy something else sooner than later. It may be time for a rent increase.

By cheap I mean 40-75k Ryan Landis

Ryan Landis and others: when I say 3rd property, I am looking at cheap buy and holds in KC, Indianapolis and other similar markets.