All Forum Posts by: Nicholas M.

This is all great info. Some of which I've heard throughout this process but for some reason reading it is making more sense.

@Jaysen Medhurst you nailed the equity number spot on ($288k). Impressive! Thanks for sharing how you got there.

@Dave Foster I've been out of the rental home since Nov'19. I've lived there for 8 years. Are you saying that I need to have it sold by Nov'21 in order to take the capital gains tax free? But if not, then I have the 1031 exchange option?

Moving forward, how can I position selling the home to family meaning, make it more cost affordable? I'm in a tough spot because I had to rent the home, to buy the new home I moved into (long story); help me, help you, type of a situation. We did agree that back in June'20 we would revisit the lease agreement: continue renting or put the home on the market but chose the former. I hate to renege on my word (not to be confused with actual lease agreement which is month to month).

Well said, @Jaysen Medhurst. Thank you for taking the time. It has been suggested to go that route as well but never had the maths been explained. I'm back to my first problem of renting to family it sounds like! Ultimately it would be great if family buys this home from me privately, which is the other option.

Going red into the property frees up the down payment for the new property but also allows me to put $25k into a savings account for both of the properties for repairs. My thought was instead of paying tax on the $500 profits, which is going into a repair account, pull it out in equity tax free? 

Btw, where does the $290,000 number come from? I'd like to take notes on your ROE equation for the future!! If I were to rent the home for market rental value ($2,200 - $2,500), what would those maths look like then?

Thank you for your reply, Jaysen. Perhaps I was not clear. Today my mortgage is $1300 and I'm collecting $1800... I'm making $500 a month at the moment. FMV of the home is $425k; it appraised for $465k.

If I were to refi and pull equity out, even if I had to pay $400 out of pocket to pay the mortgage-to-rent difference (short term), couldn't I use the revenue generated off thew new property to off set the loss? And can't I still write off the $400/mn difference as a loss?

I would like to think that my family renting the home is temporary (5 years >) and this property could still generate me revenue. Its a single family unit built in 2010.

I'm looking to pull all the equity out of my first home purchase, which is now a rental, in hopes to buy a duplex or a quadplex.

My first mistake is renting to family but it is what it is. I'm collecting $1,800 a month presently on a $1,300 mortgage. I should be renting this property out for more, maybe $2,200-$2,500 a month but family. I understand this is a mistake.

The cash out refi numbers are as follows (3.99%)

(monthly mortgage payment, which includes [principal, interest, escrow] = cash to me

$2,200 (P+I+E) = $195k (This is the max, 80% LTV)

$2,000 (P+I+E) = $175k

$1,900 (P+I+E) = $133k

It was advised to me to go the $195k route and in hopes, make up for the $400 difference in rent/mortgage a month ($1800 + $400 = $2200) to enable me to go buy another property but also put $25k into a bank account to fund repairing the properties. This seems like an aggressive approach to me.

After reading on here over the last 24-hours, I get a sense that I'm moving much too fast (its OK to go slow and learn!). I've only rented my first property for 8 months. It's cash flowing already -- why change that? (is taxes a concern?) And the idea would be to buy out of state (Phoenix/Tempe, AZ) and hire a property management company. Either two duplexes or a single quadplex. This doesn't seem advisable from what I've read on here (out of state for your first property and no real management experience).

Another concern is paying tax on the rent profits. Paying taxes on the cash flow, when I'm just putting it into an account for repairs, is a concern. If I'm taking a loss on the rent/mortgage difference, am I able to write that off? Does it make sense to lose money on the rental property to avoid having to pay tax on the rents? That is where the idea of putting $25k from the refi into an account for repairs comes from.

I hope this makes sense... thanks for reading!