All Forum Posts by: Logan Allec

@Bret Clayborne "On a buy and hold rental property the purchase price was less than the value of the land itself."

The rule is that your purchase price should be allocated between land and building in the same ratio as the value of each component bears to the value of the property as a whole.

So let's say the property is worth $100,000 with $60,000 of the value attributable to land and $40,000 attributable to building (you can use any reasonable method to determine this; one easy way used by many is the assessor's split, though there are other methods that could yield a better answer for you).

You buy the property  at a huge discount for $10,000.  $6,000 would be allocated to land, and $4,000 to building.

@Rachel Ewald For now just focus on building your cash up and start looking for a house hack you can get into after working for a bit.  Assuming you make a decent income after graduation this should not be too difficult to do in some parts of Ohio.  This is just general advice.

@Michael Vialpando Yes, that looks like a good start.  You would also have to figure how much of the shared space in the main house is used by renters.  An easy way to do this is to just count the number of people who use that common area, e.g., you have a common bathroom that is shared by you, your wife, and your tenant.  I would call that shared space 1/3 rental use.  Perhaps a slightly more aggressive (in your case) would be to allocate that shared space pro rata based on the allocation of the rest of the house, e.g., in your case, 40% personal / 60% rental.

So I would use your first section "House" to allocate expenses directly attributable to main house, e.g., utilities paid for the main house.

And I would use your second section "Cottage" to allocate expenses directly attributable to the cottage, e.g., utilities paid for the cottage. 

And I would use your third section "Whole Property" to allocate expenses not directly attributable to either unit, e.g., property taxes on the property as a whole.

Also, you should take the depreciation deduction.  Your gain on sale will be based on depreciation allowed or allowable, i.e., whether you actually took it or not.

Welcome, @Michael Phillips!  Glad to see other people making it happen in the L.A. market!

@Eddie Knoell There are companies you can pay to serve as your registered agent in a given state.

@Vincent Chen You should input all your rental income and expenses to the extent you had a real estate business as well as calculate depreciation and amortization based on your purchase.  Also, you may have a filing requirement in the other state.  There are plenty of nuances when it comes to taxes for real estate investors (hence why we have this forum), so it's really impossible to give specific answers without knowing your situation and your numbers.  Check with your tax professional.

@Account Closed leave a trail of tide pods

Try Lance Lvovsky. He is a Florida CPA here on BiggerPockets.

Here is his profile: https://www.biggerpockets.com/users/lancebvs

@Anca Lupse

Reach out to Lance Lvovsky.  He is a Florida CPA here on BiggerPockets.

This is his profile: https://www.biggerpockets.com/users/lancebvs

@Michael Vialpando

Congrats on your purchase!  It looks great.

You would prorate your main house expenses between personal and rental use using some reasonable method (easy method is to base your allocation on the square footage of personal-only space, rental-only space, and common area space), with personal expenses being non-deductible except for property taxes and mortgage interest (subject to the limitation) if you itemize and rental expenses being deductible against your rental income.  You can also take a depreciation deduction on the rental portion.

As for the cottage, assuming it is 100% rental use, yes, you can deduct all of those expenses that you can directly allocate to the cottage and take a depreciation deduction for the cottage.  Of course things like property taxes and mortgage interest you would have to allocate to the cottage based on some reasonable method (perhaps based on square footage) as well.

Note that you actually have to be in the business of rental real estate before taking rental deductions, and that there may be some expenses you incur, e.g., to get a space rent-ready, that you must capitalize to the basis.  You are typically considered in the business of rental real estate once your space is rent-ready and advertised for rent (even if not actually rented at the time).

Also note that your "within the walls" (rented rooms) and "outside the walls" (rental cottage) rental space may have different treatments with respect to the 121 home sale gain exclusion, so be sure you work with a qualified tax professional who knows his or her stuff, especially since taking advantage of the home sale gain exclusion appears to be an integral part of your strategy from the get-go.  Even the timing of when you live there and when you rent can make a difference.  See this recent BiggerPockets thread.