All Forum Posts by: Tushar P.

Very unlikely anyone will want to touch this. Maybe yes if you are the senior debt owner instead of owner of a tiny equity portion.

I’ve heard some brokerage firms offer security-based loans at very low rates:1.6-2%. That would be the best way to get cash to buy real estate, while the total stock market continues to yield an average annual return of 30-50% with zero effort.

Here are some tax benefits to consider:

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Did you zero-in on any deals in the commercial real estate, either hospitality or retail? I heard lots of auctions going on currently…

I would think you are right. It’s like renting your car on Turo. You can depreciate the whole amount in 5 years, and if you continue to own the car long enough the value of the car would be close to zero, hence depreciation recapture will be on zero or on very low amount, i.e. the impact of depreciation recapture would be insignificant. Unless you start fitting your car with gold rims to appreciate its value 😉

By the way, I thought “keep investing” was a good thing 😉

The catch word here is “keep investing” i.e. keep taking risks that accompanies every investment (including risk of total capital loss) 😏 It’s not a bad strategy for someone very bullish on real estate and not focused on diversification.

Keep investing just like those who have to keep doing 1031X to avoid paying more taxes (via depreciation recapture) than what they saved (via depreciation).

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This is an example of someone paying thousands of dollars in tax preparation each year in order to record the suspended losses noted in K-1, or pay more taxes than due upon exit because the losses were not recorded in the tax return. And keep investing to avoid paying more taxes than saved. What happened to the tax benefits of real estate investing? 😉 

Even with no tax benefits for those with W2, I invest in real estate simply for the sake of diversification. Even when it doesn’t have the upside of non real estate investments. It’s a struggle to want to keep investing in real estate but sticking to the diversification strategy.

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It’s a good point, but how to find out if the syndicator has the resilience, expertise and professionalism to turn around the deal when it goes south, or do they simply raise their hands and focus their energy in coming up with excuses for why the deal went south.

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Need to be careful of how the syndicators operate
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I invest in real estate only for the sake of diversification (~15% of my investments), and only sticking to institutional syndicators (not on biggerpockets). Otherwise it’s a no-brainer on whether to invest with a real estate syndicator or the likes of Elon musk or Brian chesky (i.e. buy stocks of Tesla or Airbnb) - the latter has bigger upside and we all know they will turn the world upside down to deliver what they promised, even when facing overwhelming odds.

@Warren Z. you paid lower taxes than owed for the last 6 years because the tax dept didn’t realize you should have been paying higher taxes. Now they have realized and want their money. Is it legal for them to do so? I don’t know. But I know that IRS can do that - if they make a mistake then they can go back up to 6 years of tax return (it’s usually 3 but they can legally extend it to 6 years) to demand their money back.

Better ask the attorney if you have any chance with the tax dept (this would not work with IRS), because they will simply write the letter and charge you money irrespective of whether you have any chance or not. Talk to more than one attorney, and let us know what they say.

For a rental property, one way to pay more taxes is to not do 1031X upon sale. As depreciation recapture is taxed at a higher rate than long term capital gains, taxes owed via depreciation recapture would exceed the taxes saved over the years via depreciation loss.

I think this is the main reason people do 1031X. Their ego doesn’t allow them to say that Uncle Sam has them by their jugular, so upon doing 1031X they claim they didn’t have to pay (they don’t use the word defer) any taxes - which is better than saying that they will never realize the gains ever (until they die) and would have paid more taxes than saved if they wanted to realize the gains. Most of the time they have to overpay to defer the taxes as good time to sell is not a good time to buy. So the decision has to be whether they overpay for a new property to defer taxes, or realize the gains and pay more taxes than what was saved. Uncle Sam is always the winner.

This is a sellers market and so the seller wants you to buy a termite infested overpriced house with no inspection and appraisal. You should counteroffer agreeing to everything and adding that there will be no earnest money and the closing date will be 1 year later, with the option to cancel the contract after 6 months. Get the point?

@Kyle Danielson if you are savvy - understand the market condition, have neighborhood knowledge, know the price point - then you don’t need an agent.

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