All Forum Posts by: Account Closed

I'm sure someone has the answer ! :)

No idea guys?

Thanks!

Hi everyone,

I'm doing some excel modeling to analyse properties and I have a couple of questions regarding losses carried-forward. Until today, I thought that a passive tax loss for a given year could be "stored" to offset another positive taxable income in the following years: i.e. If my rental generates a $1,000 loss this year but generates a $1,000 rental taxable income the following year, basically I wouldn't have to pay taxes the second year either.

But after reading a few articles, it seems like the ability of carrying forward losses depends on the household's total income. If household income is below $100k, you can save losses up to $25k (is it per year ? or total cumulative?), but if above $150k, then you can't use them anymore.. Is it the correct understanding? If so, it seems weird to me.

Second question: let's assume my property generated cumulative taxable losses of $25,000 over the 5 years I've hold the asset. Now, I decide to sale the property. Using the following figures:

Initial purchase price: $150,000

Cumulative depreciation: $50,000

Adjusted Basis: $100,000

Sale Price: $200,000

Capital gain: $100,000

Can I apply my cumulative $25,000 loss to this $100k capital gain (i.e. $75k net) before calculating capital gain taxes? If so, in this example, I would have depreciation recapture on $50k and normal capital gain taxes on $25k, correct ?

Thanks for your help

Hi everyone,

Quick question, when you calculate ratios such as cash on cash return, or even when calculating the cash flow potential of a property, do you calculate them post tax? Because I've seen quite a few calculators or articles excluding the potential tax saving on the interest payment, which obviously would have a big impact on the profitability of the operations

What's your view on that?

Thanks a lot for your answer.

Indeed, it seems that you have to play big to enter this market. But even when putting the absolute value aside, the relative value compared to rent levels seems to be completely off. And that's why I don't see how anyone can make sound and wise investments (buy & hold I mean) in the current market.

Overall, I think you're right, NJ seems like a more logical target to start my journey !

Thanks again for your help

...feels like a truly bad idea !

Hi everyone,

I've been reading the blog and the forum for quite some time now and I think I'm starting to have a good understanding of the main elements to consider when purchasing a property and the math behind it. The issue arises when trying to apply theory in real life.

Every return calculation, Cash flow assessment etc.. is heavily impacted by one key parameter: Price to rent. Unfortunately, I live in NYC and as you all know, PR ratio doesn't play in my favor !

So my question is quite simple, how can one make profitable RE investments in cities like NYC where Price to rent ratios are above 30x ? I was reading an article the other day about the 2% rule.. If I'm not mistaking, the 2% rule is basically equivalent to a Price to rent of c. 4x.... so far from reality..

Same thing with Turner's book (very good by the way) which takes parameters in his examples that might be achievable in certain cities of the US but clearly not in NYC. I know there is a chapter about RE in expensive cities where he basically advises to invest somewhere else.

But I still want to understand, how do people make money in NYC with RE at current market levels? 

Thanks