All Forum Posts by: Tyler D.

I own a property that I bought for 40k, and will now sell for 110k. I would like to sell it this year.

My income this year was 38k. According to tax law that I've read online, this puts me in the 0% capital gains tax bracket.

Does this put me in the 0% tax bracket for 38k of income? Or would the 70k profit on the sale of my house be included, which brings me into the 15% bracket?

Much thanks for the info.

Quote from @Randy Rodenhouse:

I guess if you would consider living in one of the four units as your primary residence then that might work. I am not sure how they calculate amount of time rented out if have 3 units to rent.  If you rent each unit for 2 months (3 units x 2 months = 6) is that 6 months?  Or each unit for 6 months?

 It's 6 months per unit. 

I'm looking to pick up a lot of rental properties this decade. My strategy is going to be focused on long-term rent appreciation vs short term cash flow, so I will be buying in nicer areas with a focus on rent appreciation over the next 30 years.

I like Naperville for this reason, as it regularly tops rankings for multiple metrics, but has houses available in the 400k range.

I also like the idea of buying in Chicago. The idea of buying condos downtown seems enticing, but it looks like the HOA fees really hurt the math. MFHs seem ideal, but there are almost no good options available. SFH are an option as well.

What do you recommend as the best area/ property type to focus on?

I'm a veteran and have the unique opportunity of not having to pay property taxes on a primary residence of up to $2.5m (in Cook County). I am debating the best way to take advantage of this.

The most obvious would be to just buy a nice SFH and live in it. This would be a savings of about 50k per year in taxes.

I'm also considering buying a nice fourplex. The rules require that it must be my primary residence, and not rented out for more than 6 months/ year, so this would open up the opportunity to airbnb out units at select times of the year. 

What do you think is the best way to take advantage of this opportunity?

Quote from @Allen Wu:

Quote from @Tyler D.:

There's a neighborhood that I love, and I already own a house there (my primary residence). It's awesome for quite a few reasons. 

Part of that being that the houses are quite cheap, but surrounded by much more expensive homes. I have a strong feeling that the neighborhood is going to do very well in the future.

A possible downside is that the own-rent ratio is skewed heavily toward owners. It's about 90% own vs 10% rent. Also, rents would be pretty high for the properties here. We're talking big SFHs with yards, not compact townhouses.

Would I be at a disadvantage buying this property and trying to find renters? There are a ton of good reasons for renters to want to live here, but it seems like most who can afford to rent just buy a house instead.

 I would Check Zillow rent or another app to see if listings exists. In an expensive area, renting in a Luxury class area will be tough since volume is not there and only few people make that kind of money to rent. 

I would Check your market area and track listings. If rented in 2-4 weeks, you might have shot to rent it out. 

There are rental listings, but not a ton. 

This is an area with very high incomes (median $125k household income), so a 3k/ mo rent for a big house is easily doable for people here. I'm just concerned that people who have that type of money would rather buy than rent. 

There's a neighborhood that I love, and I already own a house there (my primary residence). It's awesome for quite a few reasons. 

Part of that being that the houses are quite cheap, but surrounded by much more expensive homes. I have a strong feeling that the neighborhood is going to do very well in the future.

A possible downside is that the own-rent ratio is skewed heavily toward owners. It's about 90% own vs 10% rent. Also, rents would be pretty high for the properties here. We're talking big SFHs with yards, not compact townhouses.

Would I be at a disadvantage buying this property and trying to find renters? There are a ton of good reasons for renters to want to live here, but it seems like most who can afford to rent just buy a house instead.

A lot of the investing strategy that I see here tends to aim for immediate/ short-term gains. Either with immediate cashflow or quick appreciation in currently booming markets. 

Cheap midwest states offer cashflow. TX and FL are booming, etc.

But I want to take a step back and talk about the long-term potential of different states. I have my opinion on which states offer the best long-term potential, and I'd like to know yours as well. As I see it, there are a few factors to consider:

History: Markets with a record of success have that success priced in, and vice versa. Big cities in CA and NY are absurdly expensive and often cashflow negative because they have a track record of appreciation that is expected to continue. Rust belt cities and dying small towns have the opposite. Low prices, high cashflow based on previous failure. 

When choosing states for their long-term potential, I'd prefer to choose states with a bad history (and a bright future), to get them at low prices.

Economics: The #1 driver for success of a city/state (and its home prices) is its economics. People willingly spend huge sums of money to live in big economic centers like NYC because of the opportunities that are available there. Currently, big cities, specifically those in CA and NY are facing issues such as high taxes, increased crime, etc. This combined with rising remote work opportunities are driving people to cheaper areas. 

I don't know exactly how this will play out, but I wouldn't bet on the currently expensive states like NY/ CA. We might see a long-term rush to the suburbs/ smaller towns, or it might be a temporary blip before we see people move back to the major cities. Still something to consider.

Weather: Specifically changes in weather. the world is slowly getting hotter, and some southern states like AZ are so hot that you basically have to stay locked inside in the summer. Interestingly, the states that most are flocking to now like TX and FL are the most vulnerable to temperature increases, and the states most insulated from this (northern states) have been being moved away from for years.

A shift up in temperatures over the next few decades could flip the current migration trend and see people in the south moving north. 

Overall, considering all of these factors, I see the great lakes states as holding the most long-term potential. They have a negative recent history, and are very cheap compared to the rest of the US. For a city of its size, Chicago is ridiculously cheap compared to NYC/ LA. 

Additionally, the great lakes states are very insulated from future climate changes and would actually benefit from them. Increases in global temperatures would make winters shorter and less harsh. 

Economically, they are not great currently. But they have excellent infrastructure due to being economic hubs of the past, and current transportation hubs. 

What are your thoughts on the best states for long-term investing potential?

I'm planning to buy a fourplex for the long term (30+ years) and after researching a lot of places, found Chicago to be a potential candidate. I wanted to know from people who know the city how it's doing.

Chicago appears to have a lot of problems. Government debt. High violent crime. Cold weather etc. But it also has many positives. Tons of great companies and jobs are here. It's the 3rd largest city in the US, and without a doubt the largest in the Midwest. I don't think it will lose that crown anytime soon. Most importantly, its real estate is very cheap compared to cities of it's size.

So, from those who know the city more intimately, is it worth investing in for the long term given it's problems? I could see Chicago being a great play if they are able to solve their crime problem, and as global temperatures rise, the weather will become more ideal with time. I also don't want to buy into the next Detroit, because although it is cheap, that doesn't mean it couldn't keep dropping in value...

Originally posted by @Kevin Romines:

It is an interesting thought and you have most of the details correct, however just because VA doesn't have any loan limit, doesn't mean there isn't a limit. That said, the Conventional limits for any given area are what the lenders use as the VA limit. So in some high cost area's the 4 unit loan limits will be as high as $1,867,275.00. That would be your max. loan size on VA even though VA doesn't have a limit per say!!!

Also as was mentioned before, it must be owner occupied for at least 1 year. Do you have the kind of job that you can work remotely? If not, you will at least be required to have a job offer with a letter stating your employment has no outstanding conditions. You don't have to have started that job before you close, however you will have to have 30 days worth of paystubs within 30-60 after the funding of the loan (some lenders allow this). 

I hope this helps?

 Thanks for all of the details Kevin! I do work remotely, so that won't be a problem. I'll take a look into conventional limits and see what my upper bound will be for the areas I'm considering.

Originally posted by @James Carlson:

@Tyler D.

I've never seen a more sure-fire way to get spammed by a lot of real estate agents. Well done!

Kidding aside, what about Denver? Lots of tech money, diversified economy, big influx of high-earners, growing population, awesome quality of life. Plus, super low property taxes. (Ain't going to find that in California, New York or Austin.) And don't worry, it's plenty expensive to find you a deal like that. ;)

 Not to get sidetracked, but Cali has potentially the lowest property taxes over the long term with prop 13. That makes it appealing, but there are enough negatives to make me very wary about buying in California now.

that being said, I'm looking at CO. It has a lot of pros.