All Forum Posts by: Mark Silberman

Congratulations Sunny.  You have done very well for yourself and your family.  How is the landlord business going?  Have you had any difficult or demanding tenants?  And are you able to handle managing the units while having young children and a full time job?

And finally, you are quite leveraged on these properties.  Given the proximity to major employment centers, the rental demand for your location should be excellent for these affordable rentals.  Just the same, have you made any contingency plans for a down market or a recession, say if you have a couple of ongoing vacancies or some major roof or HVAC expenses to cover?

Thanks for your comments Brandon.  Your advice has me thinking about other options.  I am going to look further at generation of passive income.

My spouse and I own rental properties. Our longstanding property investments had passive loss carryovers from the earlier years that are now going down each year due to passive profits. (The rental market is very strong and rents have gone way up over the years.)

We bought more rental property in more recent years. These more recent purchases are generating profits, but the depreciation write offs translate into a net loss for tax purposes. My spouse works very part time as a teacher, and she spends lots of hours on real estate, researching properties, purchasing, and she is in the process of reactivating her real estate license.

Here is what I am considering. (I haven't yet talked to my accountant about this.) I am looking into classifying our rental property activities in the most tax advantaged fashion possible. If I manage the properties that we have held for a long time that are generating taxable gains, this could allow us to use up the remaining passive losses. If my spouse is active in real estate to the level required by the IRS to make her real estate activities qualify as "active" under the tax code, she could manage our newer properties and allow us to take the tax deductions for active losses after the real estate depreciation deductions.

Does anyone have experience with this type of situation? Any thoughts whether this scenario would be allowed as reasonable and proper from a tax perspective? Any other ideas about structuring this in the best possible fashion from a tax perspective?

I am new to this forum. I am looking to add more properties to my buy and hold real estate portfolio, but as I read what appears to be the conventional wisdom here, it seems I have broken all the rules others use to value deals. Yet I consider my real estate investments to be very successful.

I live in a very expensive suburban area outside NYC. And I buy properties that are in prime communities, top schools, great commute to high paying jobs, etc. I buy properties with 20% down that are mildly cash flow positive after paying all expenses including the mortgage. I typically rent to long term, highly compensated professionals who stay for several years. Although the cash flow is only mildly positive in the first couple of years, the property value appreciation is large and the positive cash flow gets better year after year as the rents steadily rise. And that positive cash flow comes to me mostly income tax free after taking paper depreciation deductions.  Demand for both rental and sales of quality properties in top school districts here is very high, and job growth is slow, steady and strong.

My thought is that annual appreciation of somewhere around 5% on the overall value of the property is leveraged times 5 by my 20% down payment. So 5% appreciation becomes 25% appreciation on the cash that I laid out as a down payment.

What am I missing when I read others opinions about needing to meet certain cap rates in year 1? As one example, a long term buy and hold property that I own was purchased 20 years ago with a small down payment is now worth 18 times my initial investment, with almost no mortgage left on it, and it is throwing off tons of positive cash flow every month.

I am interested in opinions on my approach, where I consider a small positive cash flow in year one as fine as I focus more on the long term rather than the immediate first year returns.