All Forum Posts by: Kat N.

Investor gurus, I would like to learn from your experience. I am starting out my real estate investment for about half a year. I have been with 2 active deals (flip and sell). 1. Per your personal experience, at what point do you start passive investment (e.g rental property)? I do see active give me fast money, but is requires lots of work. Do you keep both active and passive investment eventually? 2. I live in Bay Area so rental property cap rate is pathetic, it is about 5-6%. - Anyone in Bay Area actually invest in rental property? How do you make the numbers/the deals work? Any tips? - Anyone experience in investing out of your market? I am looking for advice to invest rental property outside of my market, such as pitfalls/great experience working with turnkey companies, local agents, local property management etc ... Thank you very much, Kathy L.

@Dave Foster: Thanks Dave! I reached out to a friend who is local investor, he has been flipping 100 houses (~10 houses / year). He actually never took advantage of 1031 because of the timing limitation and sometimes he needs to buy or sell houses fast. 

My hunch tells me that 1031 exchange is more suitable to passive investor (e.g rental property) who has time to plan and to exchange the property. Of course, I am exploring 1031, but it is my initial thought. Love to hear from yours! 

Best, 

Kathy Le

@Katie L.: Thanks so much Katie!!! It is very useful. Sorry for the late reply as I was trying to close the house documents. 

I think for this house, I will keep it as primary residence as that is how I get it financed. I will learn about 1031 exchange as it looks like it is a way to go for long-term. 

@Katie L.: Thank you very much. 

This should be my personal residence because this is how it is documented in the escrow and bank loan. To summarize:

Personal residence:

    1. Major improvements - added to my basis

    2. Minor improvements - not deductible

    3. Purchase / sales expense - depends, some expenses can be added to basis, some are not deductible. 

Investment properties:

    - All major, minor, purchase/sales expense are deductible - some are long-term, some are immediate deductions

So it looks like personal residence is at disadvantage. Probably a dumb follow-up question, how can I declare my property as investment property? Can I convert from personal residence/property to investment property?

Thanks, 

Kathy L.

Hello Biggerpockets community, 

I am newbie in Real Estate. I just bought a house (in California) under my name using traditional bank loan (so no LLC or Corp). My thought process is that I will fix-up the house. If the market is good, I will sell it. If not, I can live in the house as I need a place to stay anyway.

If I sell the house, how can I deduct construction cost from my personal income? For example, my purchase price is $A, my construction cost is $B, and my sell price is $C. My personal income should be $C - ($A + $B), and I should be taxed on this profit. (and NOT $C - $A)

Since I don't have an LLC, the house is under my name, how can deduct $B from my personal income? It will be a misfortune if I can't deduct construction cost $B ...

I appreciate all of your input and advice since this is my first house ever!

Thank you very much, 

Kathy L.