All Forum Posts by: Tasha Davis

I have a day job - don't know where you're coming from - but I have found that my my federal tax refund has gone up after my first few rental homes.  I'll pay the piper in a couple decades but for now that isn't a concern.  But I do make sure I keep a certain amount in reserves for repairs and the like before finding the next deal.  But I'm not very good yet at using other people's money...

@Tasha Davis

Second part of question, Are are you able to save for federal tax on rental income, money for if things go wrong and money for a down payment for another house?

Sounds like several questions into one. Yes to all three. You are able to save money on your federal tax return, and state, when you file schedule E, rents and royalties. This schedule will total all rents and expenses. This will include depreciation for the building, but not the land. You can expense 53.5 cents per mile, so you better start keep mileage records. 

You should start saving money from the net rents you receive, build reserve. Unexpected expenses will occur. Get good at repairing things and make Home Depot your best friend. Keep all receipts.

After a few years, your reserve will build. You get good at fixing things. if you don't know how to fix something, there's always a youtube video. Buy bulk on items you know will need, like toilet flaps, control values for toilet, even look for used snake for drains on craigslist. The reserve could someday be used for down payment of another rental.

Terry

I would refinance as soon as you to get long term financing on the property. Just make sure the bank is willing to refinance you at the appraised value instead of the cost you have into the property (this is called seasoning). Some things you want to do fast (rehab it fast, rent it fast, refinance it fast), but it's also important to grow at a sustained rate and not try to get from A to Z all at once. 

Don't worry about going super fast, especially at first. Just do one, then get it refinanced, then go onto the next one. As you grow bigger, things start accelerating and you're able to buy more faster. The biggest problem in real estate I see is people afraid to jump in. The second (other than maybe underestimated rehab costs) is people who get delusions of grandeur and want to grow too quickly.