All Forum Posts by: Tom Kastorff

Ralphie I am curious as to what you were expecting to hear from your CPA, as it sounds like there was an expectations gap? Did you read, or were you told something else that made you believe that "buying rental properties in the near future" directly correlated to massive tax breaks? I think it would be best to start with what you expected vs. what you heard. You didn't really provide any detail around that. 

Rental properties are taxed as normal income. Meaning, if you make $100k in your day job, you have a rental that grosses $20k but nets you $10k in cash flow, you now have total annual income of $110k and will get taxed as such. You will factor in the mortgage, prop taxes, expenses, capex, losses, and all that, to hopefully "zero out" the gains, but that is not guaranteed. As many pointed out, the long term benefits of rental properties typically far outweigh the short term. Capital pay down, appreciation, and hopefully cash flow are all gains. If you are thinking of owning rental properties purely from the desire to tack on tax breaks to your current income, IMO that is a wrong expectation without some unusual circumstances and tax strategies. 

@Parker Eberhard great topic. I have been following the PS market for a while, and the main (major) issue with STR / Airbnb in PS is the restriction on condos. You cannot STR on 99% of the condos / complexes in PS proper, close to the main drag. NIMBYism has hosed this model. So, you are left with SFH and they are typically 2-3x the price of a decent 2b/ba condo, so it would make the 1% rule / cash flow pretty difficult to attain IMO. I have seen some really nice houses in the ~$500k range, but I struggle to see how it would be profitable year-round. Where as a nicely remodeled 2b/2b for $200k close to the strip should easily carry itself and more.

What in particular are you looking for / interested in? 

@Tiffany Hoffman where would you recommend the OP buys a duplex/triplex in SD with $150k cash? Honest question. IMO you would have to go pretty far east county to get that sort of cost. If she can only reach up to $600k purchase price, that is pretty limiting in this town for a SFH. And since she stated it would take all her available funds, I would not recommend that either. Proverbial "putting all your eggs into one basket" and pretty risky.

I'd offer two scenarios that have somewhat been mentioned already:

a/ rent for a while, get to know the town (it is large, huge difference in neighborhoods 30m east, 30m north, 30m south, etc.), and while doing that, save more money and understand what you can afford and what you want to buy. Most homes in SD are old, meaning you need to truly have your capex/maintenance fund ready just in case. Determine what neighborhood(s) first, and that will help determine if you can afford a SFH or multifamily type property.

b/ wait and refine your answer to Kris' question of your goals - you stated "But right now I'm not sure what my goals are, other than that I want to make a financially smart move. I don't want to go the conventional home-buying route if it means I lost the opportunity to get more value for my money." Often the smartest move, when your first reaction is "not sure what my goals are" is to do nothing. Be patient. Buying property in SD is not a cheap decision. Nothing here is cheap. There are lots of great contractors, lots of bad ones. We cannot really answer the "best contractor" question until you know where you will buy and live and who services that area. Often neighbors or nextdoor.com are the best resources for any and all contractors/services for a specific neighborhood. That's how I found the GC that remodeled our backyard this summer (nextdoor).  To me, your original post and responses don't scream that you have a true set plan yet, so keep revising and doing homework. The best homework you can do is move here, rent, understand where your job is located, and what proximity and neighborhoods mesh best with what you want to do. 

Final alternative is just move here and buy the best property in the best location your money can buy. Hold long term. That approach has worked well for many people in this town. 

@Tiffany Hoffman would love to connect on multifamily property. I am mostly looking out of state, but always interested in local opportunities. 

Great story Jessica. An accidental investor, how many folks start. You have a great head start with the equity. If the property cash flows (mortgage / expenses lower than rent) then I would absolutely keep it. One option is to cash-out refi (or HELOC) to pull some of the equity out and continue buying properties, or add the ADU on the property (or wherever you were thinking of putting one). I have a vacation rental that I also purchased at the bottom, it has doubled, and I am going to do the BRRRR method for my next property using cash-out refi funds.

I live in SD (born, raised) and would love to buy more property here, just too expensive. Pretty impossible to hit 1% rule unless you find a fantastic off market deal. I am looking multifamily out of state.

Highly recommend attending some of Brandon's webinars, and his book on rentals so far is great.

Good luck and welcome!

@Alex Bekeza thanks dude, I did brain fart and not see the whole BRRRR image details, my bad. Cool graphic and website. Will definitely keep you in mind. Thx

@Alex Bekeza multi-family 6 unit? or only SFH/condos?

Like other's said, rent a truck at home depot for this. 

As Kenny said, if you buy go Tundra. I have a '14 for hauling stuff to my rental in the mountains, including my skis. It's a super reliable beast. Will never sell it. 

https://www.sandiegotaxman.com...

SD taxman. Dennis owns his own firm. He owns Thorn Street brewing, Home&Away bars, many other things. services many high end athletes and businessmen. Has done mine for years. Knows his ****. Give him a call and see if he can help. bonus is the tax shop is above Thorn brewery.

I am glad you appreciate various opinions, I am not here to skewer you, but to provide the devil's advocate side of things. I don't know you, don't care what you do, it's your money. But you posted here for a reason. I've been in your shoes. I was making $150k in my mid-20s selling insurance, bought the s2000, trips to Costa Rica and Greece, etc. I am glad I bought the s2k, and did not blow 45k on the Porsche I wanted. The money I invested in my IRA/401k is worth hundreds of thousands now.

You have to understand "perception" and what that means. You are ~4 years out of DDS and buying a $75k garage queen. Who cares what you think of forward/presumptuous thinking, that is what everyone around you will see you as - a 30 year old who thinks he arrived. Akin to the Twitter/Uber engineer who cashed in $2mil in stock lottery tickets when their company went public, blowing money. Except you are only making $140k, not cashing $2m in RSU lottery tickets. That's worse IMO, especially since you want to finance it! That goes against pretty much every investing principle in the book. You can choose to ignore it, but let's make it clear what you are doing. It is purely YOLO at this point.

I would wait until you buy into the practice, double or triple your income, invest more, and then decide later. Stating "I’m trying to progress as fast as possible toward that" in a thread where you talk about blowing $45k + insurance/maintenance on a 2nd vehicle is literally counter productive. You realize that? Repeat that to yourself a few times. If this is what you blow your money on now, what will you want to "level up" to once you 2x and 3x your income? A Ferrari? This is how folks who make money, blow money, and end up broke somehow when they make $500k. Cars, boats, RV's, you name it. Again, read WCI, posts about guys living paycheck to paycheck because of lifestyle creep when they are senior doctors.

I won't spend any more time on the investing/market timing part, if you are a long term investor, you messed up. Period. YOLO there too. It's called "buy and hold investing" for a reason. Market timing is not involved. Your money cannot make money sitting in a 0.01% interest bank account. While everyone made money in the market this year, you lost money to inflation. 

Good luck dude. Buy the car if you want it. It's not a financially sound thing to do, but it's your money. Just be real with the consequences of not putting that money to work, but financing a depreciating asset sitting in your garage. 

Scott can you tell us what makes you so qualified to make these statements and time the market? You realize that the market went up considerably in 2019, right? Just a basic Vanguard staple stock market index fund like VTSAX is up 31.12% YTD. That is thirty one percent. What exactly is your "huge advantage" that you speak of? Honest question. I am curious what makes a DDS this qualified with investing that you know how to wait for the correction, time the market, buy the low, sell the high, etc. If you are this good, you can probably get a job on CNBC. 

I'm giving you grief of course, but this should be a dose of reality. Post these statements on a finance forum and you will get murdered. If you are a long term investor none of what you wrote matters for 20-30+ year investment returns.