All Forum Posts by: Michael Sawers

@Jingru Sui I’m hoping to come out ahead.

3-4 bed / 2-3 bath. Modern look. Good school district.

Am I wrong to assume I would get better value for a house if it’s flipped? I don’t necessarily want to spend $350k, but I can if I need to. There are no updated houses on the market right now.

@Anthony Dadlani this specific scenario might be only once every 5 years, however, I wouldn’t mind partnering with someone for a more traditional flipping strategy. Regardless of being a PM in construction, I simply lack the knowledge to flip a residential property. My wife fears that we would end up being the ****** flippers who make it look nice but break every code. We also just don’t have the time with both of us working.

We can’t find any truly turn key houses in the area that fall within budget. I’m hoping by taking the risk away from the pro, I can get a turn key house with all the modern updates for a more reasonable price.

My wife and I are looking for a house to buy in the Atlanta area. We are open to homes from Decatur all the way to Suwanee. I’m interested in hiring an experienced professional flipper to help me find a fixer upper and flip it for us. You would have to find a house that you personally would buy and flip for a profit, however, we would buy it and hire you to flip it. No risk on your end. We would pay you cost plus markup. Our all in budget is $350,000. Anyone interested?

I’m the older brother planning on paying all up front costs. My younger brother, new to his career with little capital, will be living in the house, paying rent, and acting as the landlord. I want to keep the agreement between us professional. I want to treat him as a tenant, property manager, AND a partner. I will pay him the property management fee along with a portion of the profit from rent. He will also be responsible for the market value of rent as the tenant. What I’m trying to find out is what percentage of the house should he own if he put nothing down. I want to make this purely business and fair for both of us.

I am about to start a new project in Clayton, NC (30 min south of Raleigh).  I move to the area on October 1st.  My wife and I plan to purchase a house/townhome as our permanent residence which we will live in for the next 2 years.  After that, I would like to put it up for rent.  I am ok with commuting up to 30 minutes, so the areas I've been looking has been from the mid Raleigh area (draw a line from NCSU through downtown) all the way down to Clayton, NC.

My fear is purchasing a house which doesn't appreciate at all, having trouble selling quickly, or having trouble finding a renter to cover all costs of the house (including a property manager).  I've done plenty of research on the rental aspect of this, but I've never actually purchased a house.  I also hate the idea of buying a house at market value, but in Raleigh, it seems you have to buy them for above market value.

Any suggestions?

Thanks,

Mike

Originally posted by @James Mc Ree:

You can accrue passive losses for next year's tax return too.  If you reach a limit and the $758 is not deductible this year, you can roll it over to next year.

You can also deduct your maintenance expenses.

 Ok, that makes sense.  As for the maintenance, I want to make sure it cash flows even if I don't deduct my "budget" which I won't always use.  Half the time, repairs will be taken care of by the deposit which will end up being additional income and simply zeros itself out.  The one year I decide to replace the roof, carpet, or siding is the year I can deduct my budget.

Originally posted by @Account Closed:

You may want to research passive income and losses.

It depends what you do as your full time job (is it real estate related?) and what your AGI is.

If you aren't a real estate professional and you have an AGI more than $150k then you can't deduct any passive losses against non passive income for the current year.

Disclaimer I'm not a CPA so by all means do your own research.

So I can essentially adjust my passive income from 62 to 0 while the remainder of the 758 (696) is forgotten about.  Correct me if I'm wrong, but all of the "depreciation" I claim must be paid back when I sell the property.  So the 696 that I didn't claim is forgotten for the tax payback upon selling the property as well.

Originally posted by @Christopher Phillips:

@Michael Sawers

In short, yes. That's why Robert Kiyosaki called it the greatest investment. The government makes real estate investing beneficial because you give someone a place to live. For now.

As a homeowner, your big itemizations are interest and property taxes.

As a landlord, you get to write off almost everything involved so that you show a "paper loss" on your taxes. But, never fear, you have to plan the exit strategy properly to minimize capital gains. The calculation recaptures that depreciation in the cost basis adjustment. So, you need proper accounting advice to minimize the capital gains scenarios at time of sale.

 Wow! I thought I was over analyzing it, but I guess not!  I spent an entire year thinking I would have to pay a good portion of my income to the government.  It was nearly impossible for me to find a positive cash flowing property using my old methods.  Thanks for enlightening me!

I have been analyzing houses for almost a year now.  I understand the basics and really just need to dive in.  One thing that has been a little confusing to me are the tax deductions.  Off the top of my head, you can deduct the following:

• PMI
• Home Insurance
• Property Tax
• Managers
• HOA Fees
• Depreciation (80% of assessment divided by 27.5????)
• And the big one, interest paid on mortgage.

While analyzing the data on a few houses, I noticed that the first 3-4 years tend to have larger deductions than total income.  I believe the largest reason for the high deduction is due to the "Depreciation Deduction".   In one case, I calculated a RETURN of $290 just from my rental property lumped into the same pot as my current salary.  Is this possible or am I deducting too much.  This same property will cost me $5440 at the end of the mortgage where I am paying hardly any interest.  Does this make sense to you experienced investors?

Just in case you want the numbers, I've posted them below:

• Purchase Price $165,380

Monthly Expenses

• Mortgage: $630.69
• PMI: $0
• Home Insurance: $66.67
• Property Tax: $157.50
• Manager: $256.62
• HOA Fee: 0
• Maintenance: (I don't deduct this) $166.67

Monthly Income

• Rent: $1400
• Vacancies: $116.62
• Income: $1283.38

Yearly Cash Flow

• $62.79

Yearly Deductions

• PMI, Home Insurance, Property Tax, Manager, HOA Fee: $5769.48
• Interest Paid on Mortgage: $5578.03
• Depreciation: $165,380 * 80% / 27.5 = $4811.05
• Total: $16,158.56

Adjusted Income

• Yearly income: $15,400.56
• Yearly Deductions: $16,158.56
• Adjust Yearly Income: ($758)