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CoronitaParticipantWell I owe federal about $3k and state owes me about $4k…
But the best part is I reviewed my taxes and realized that with turbo tax, I was accidentally importing my custodian account for my kid into my own tax, even though I filed my kid separately already….
It made me wonder if the same thing happened in 2012 and 2011…Yup it did…
So I also have to file a 1040X and 540X for both 2012 and 2011… I think combined the fed and state owes me about $3k for those two years for me overpaying… Plus interest….
I know, I should have double checked things, and how come my tax folks missed it…. Well, because my 1040 is around 200 pages, and my kid’s taxes is so easy I just end up doing them separately….. Oops…
CoronitaParticipant@52…..We’ll that’s one creative way to burn through whatever saving/retirement money you had…Attorney fees…
April 9, 2014 at 10:44 AM in reply to: Advice sought on renting out old house versus selling and taking the money #772676CoronitaParticipant[quote=bibsoconner]Thanks for your latest comments flu. Not sure I quite followed them though. Our household income is roughly $220K/yr gross. We have no stock dividend/interest income to speak of. We sold all the stock to buy the new house. Our mortgage+taxes+insureance on the new house is around $5500 which is quite a bit more than $0 on the old house, and does keep me up at nights.
I’ve taken all the comments here to heart but it looks like we’re leaning towards renting because the boss (wife) thinks it’s a good idea. She might be right. She’s much smarter than me. It concerns me that the cap rate is only 4.3% or so. I based this on $650,000 price, and took into account monthly rent, management fees, prop taxes/insurance, gardener BUT NOT maintenance or down time (time between tenants, etc.). As I said before, it’s by no means clear that one can get 4.3% in other investments. Certainly I have dividend stocks in my retirement account that pay well now, and they may even go up by 100%. Or they may do what my GM and WAMU stock did a while back and go to 0.
To answer another question, no we don’t need the money right away. So if prices went down a lot, we could ride it out. Of course if house prices dropped 25%, I’d expect to see rents drop too! Given the huge capital gains advantage of selling right away, it sure seems like we better be willing and able to rent for a long time. Realistically, I don’t see us moving back in for 2 years to lock in new tax advantages.
Thanks to all,
Dave[/quote]I think you can ignore what I said about taxes. Never mind….Brain fart..,.
Please ask someone who is an accountant.
..But I think the exempted portion of capital gains from sale of primary residence I don’t think counts toward what is used to calculate the 3.8% tax surcharge….
This I think explains it..
http://www.realtor.org/small_business_health_coverage.nsf/docfiles/government_affairs_invest_inc_tax_broch.pdf/$FILE/government_affairs_invest_inc_tax_broch.pdfEven more reason why from a tax efficiency standpoint, there is a huge advantage of selling a primary home versus any other sort of investments..
Also, the new 20% capital gains tax rate also I don’t think applies to you either, if you don’t have any all capital gains elsewhere…
http://www.marketwatch.com/story/taxmageddon-may-wallop-home-sellers-1344975382108
Anyway, do some research on the 3.8% medicare tax surcharge and the 20% capital gains tax rate… If it’s not applicable to you now, it’s very possible it’s very applicable to you in the future, if you don’t plan on selling your primary home, which gets special treatments….
Gee. I’m jealous
April 9, 2014 at 7:47 AM in reply to: Advice sought on renting out old house versus selling and taking the money #772674CoronitaParticipantOne thing I didn’t consider all is the income taxes… Maybe someone could chime in on this, because I’m too lazy to look things up.
Suppose someone has a household income (couple) of
$150k in W2 salary
$40k in long term capital gains from stock salesPerson is now considering selling primary home for $300k profit…
What are the tax implications?
1. I think the W2 salary income $150k still gets taxed the same regardless of one sells the home or not.
2. The $300k gain from the primary home sales is tax free, due to primary home capital gains exclusion of up to $500k for a couple
However,
3. Would $40k long term capital gains from the the stock sales end up being taxed at 20% instead of 15% ( since the household’s AGI > $450k) ? Someone correct me if I’m wrong…4. Would the $40k in investment income then be subject to the 3.8% medicare tax surcharge (which kicks in on the any “net invest income” for folks with an AGI >$250k/household)?….
If #3 and #4 is true, then I guess the solution would be don’t sell any stock that year if your normal AGI isn’t already hitting those thresholds…
April 8, 2014 at 12:25 PM in reply to: Advice sought on renting out old house versus selling and taking the money #772632CoronitaParticipant[quote=bibsoconner]Thanks for all the comments and advice so far. To answer some of the questions. Yes, I have another home to live in (in San Diego). As I said, I realize it’s a lucky problem to have. I’m in my late 40s.
The decision to have a property manager is probably a good one for me. I’m not particularly handy, and my job takes up a great deal of my time. Quite frankly, I’d rather play catch with my kids than change a light bulb on my own house. I really don’t want to deal with problems from renters. That might well be a point for selling, rather than renting.
I’m paying 8% to the property manager. Frankly, I thought that was a fair deal. Others were asking 10%.
We’re going the renting route right now, but could easily change. I’m getting nervous that it is not renting after being on the market for about 20 days, although things seem to be heating up now (we did a price reduction from 3400 to 3100). My basic research indicates that there is not as much demand for 3+ bedroom houses in the >$3000 range. There’s just a smaller segment of the population that needs that. And those folks that can afford >3000/month can entertain the ideas of owning something. That’s why I was floating the idea of selling and perhaps getting a couple of small houses/condos. Although knowing myself, I probably would not get around to the buying part…Property taxes are about $4000/yr by the way.
Dave[/quote]Given some of the additional details you provided..
If I was in your situation, most likely I would sell and pocket the $300k cash tax free, and put it to use for something else for a couple of reasons..
1. There’s absolutely no chance you will move back into this home for nostalgic reasons. You already have a move-me-up primary home…
2. If you’re worried about possibly losing out on more appreciation, well look at it this way..
a) If property values continue to go up, you have your current primary home to get another capital gains tax exemption on.
b) If property value goes down, you cashed out the first one, mitigating the “paper loss” on your newer primary. Besides, you can take comfort that your primary home isn’t earning income anyway if you’re living in it so you shouldn’t care…It’s the nice thing about having a primary home now and being able to dispose of the old one.
As a wise RE guy once said to me.. “It’s not about whether you win or lose. You already won.. It’s about how much you are winning by…”
3. Where I might consider keeping the home is keeping it to let my kid(s) inherit it..But that’s a long time out, and we don’t know what our government is going to do with estate taxes moving forward both at the federal and state level.. If in doubt, just look at what’s going on right now in New York…
http://www.cnbc.com/id/101561812
The headline is misleading, because it’s not really 164% increase total… But the point is, taxman is coming to tax the crap out of your estate if not sooner, definitely later. So, maybe leaving everything in an estate isn’t such a great idea.
4. If you’re bent on being a landlord, and cashflow is what you want, maybe you can do some research into finding something like a 1/1 or 2/2 that cashflows comparable, but doesn’t require you to put the entire $300k. You might then have something leftover to spread the risk to another asset class.
Disclaimer.. I’m doing this, others are doing this.. And finding good property in SD that cash flows well at this point (in the areas I want to do this in is getting really challenging)….
5. 4% is currently what some high quality companies are paying with a dividend yield. So while I don’t recommend putting everything into stocks, it might not be such a bad idea to spread your money out among real estate, some stock, and something else, or just hold onto some emergency cash…
Altria for instance is paying around 5% dividend…
And there’s plenty other “boring” companies that are doing 4-5%… My problem is that historically, I have the opposite problem. I’m way too heavy in stocks, around 80%+ allocated into stocks a few years ago.. I wanted to move money out of the stock market into cash and something else other than stocks..My ultimate goal that I’ve been working out is to more readily distribute my net worth between 40% stock, 40% rental property and 20% cash.
Disclaimer: don’t listen to me for financial advice. In fact, people usually find out doing the opposite of what I say works out better 🙂
CoronitaParticipantThat said. My impression so far with the Carmel Valley public school district has been pretty positive. Obviously, things could be better, but at the same time, I think one of the reasons why this district is good, there are good teachers, and as important, many many actively involved parents, as I’m sure is the case in many other parts of other districts in San Diego…Better than when I attended public schools…
We’ll see once we getting into upper grades…CoronitaParticipant[quote=AN][quote=CA renter]AN, flu was directing that last part at me. He’s not trying to make an actual point.[/quote]Whether he’s directing that at you or not is irrelevant. I totally agree with him that those are crappy teachers. But IMHO, those are not the worse. The worse teachers are those that belittle, demean,abuse, etc their students.
But it’s a little sickening to hear you defend them so easily (even though you say you don’t condone those behavior). If you defended those teachers so easily, how can I take anything you say as objective and unbiased analysis of the situation?[/quote]
I didn’t even realize we were talking about CAR until now. CAR if you took it because you think I was referring to you, I’m sorry you did, because I wasn’t…
Anyway, AN I was specifically referring to some of my public school teachers that were just horrible in different ways….And there were many of them, though some of them, as I said, ended up being entertaining…
First, there was my sixth grade math teacher…Who conveniently called me into a parent-teacher conference, because apparently I was (1) not paying attention (2) seemed like I was clueless on what was going on and (3) had a problem with focusing….
The sixth grade honors math teacher, mind you, had a thick Californian accent, complete with every other word coming out of his math was “dude”….And part of the reason why I was tuning out was because I couldn’t understand what the he was saying….
He could barely teach the subject, kept rambling as if he knew what was talking about…The conference was pretty hysterical. I mean, here was this teacher, obviously teaching a subject way over his head, trying to explain to my parents that math wasn’t my subject and how when I grow up, it’s probably best that I don’t pursue a STEM degree..Lol….I think that was the first time my dad ever expressed anything about public schools…the first thing that came out of my dad’s mouth was … “Are you kidding me? That is honor’s math in the U.S., and “he” is your teacher?”Seventh grade honors math wasn’t much better. The teacher was sort of a mean nasty person.. I still remember she would give everyone a “blue slip” for everything, and send kids to the principal’s office for the smallest things…Her teaching skill wasn’t that great either…A lot of parents complained about her, but nothing happened… Personally, I got along just fine with that teacher.. She taught verbatim from the book, so I just ended up reading the textbook instead of listening to her.
High school wasn’t much better. The English (H) teacher had a really nasty temper…Blew a gasket if you sat too close, blew a gasket if you got up to get a tissue, or had to go to the bathroom, or just was a bad mood.
10th grade was actually fun… English (H) was taught by a surfer dude again… He shared with us that when he was a kid, he hated English and reading, so he got by with cliff notes and the comics version of required reading… I thought it was such a good idea and great tip, that I basically did the same thing that year and saved a bunch time by reading cliff notes and checking out movie versions of class novels….
11th grade US History AP was fun. It was taught by a diehard anti-Reagan guy.. He always went off the deep end about “Ronnie-nomics”… Thought JFK was God….Talked about cops being “pigs”, talked about revolting against authority, and talked about being “free”…He also talked about his view on relationships… (guy ended up having an affair with a former student in his class….uh yeah)….That’s all I remember about that class. We showed up, listened to his B.S. and stories and took the AP exam at the end of the year after cramming the last two weeks before…
12th grade was actually great. I had a real physics AP teacher and a real math teacher calculus BC teacher…Both intentionally flunked half the class the two weeks of school… Their way of weeding out the students that wouldn’t be able to keep up..Both stuck exactly to the topic, no BS, no crap…. For the rest of us that survived, we pretty much covered the first year of college during the entire year….Still my favorite two teachers…..
…..
Funny, how after all these years, it’s these things that stick in one’s mind….And supposedly I went to one of the better public schools at the time….CoronitaParticipant[quote=AN][quote=scaredyclassic]SCHOOL IS HELL, by matt groening.
so few citations to the simpson’s creator’s presimpsonian pivotal work, yet it covers virtually everything one needs to know about education.[/quote]Only if you have a crappy teacher. I actually enjoyed schools most of the time.[/quote]
A crappy teacher by itself isn’t a problem.. I had a few crappy teachers that made it fun just going to class, because we didn’t have to do much…
A crappy teacher that *thinks* they are hot sh!t and feels compelled to exercise a certain level of authority on a subject matter while obviously being incompetent….can be miserable..Especially if you’re someone that can’t stand bullsh!t…
I hate people who talk and talk but can’t do…Talkers just suck…
Some people have this problem that for every 1 thing they do, they’ll talk it up with like 4 lines of bullsh!t. I prefer the folks that do 4 things and take 1 line or less to tell you what they did…April 7, 2014 at 10:00 PM in reply to: Advice sought on renting out old house versus selling and taking the money #772605CoronitaParticipantI don’t have an answer for you.. But here’s some questions you should probably ask yourself…
1. If you keep it, you would rent it out $36000/year less insurance/taxes/hoa/management fee, less income taxes… How much would that be?
2. Are you leaving the state? If so, do you think you might return?
3. What are you going to do about housing? Do you have another home you are living in or will live in?
CoronitaParticipant[quote=paramount]Any long buys out there?[/quote]
I’ll let you know as soon as I’m done with my taxes …..
CoronitaParticipantOf course, not that I said it, things will probably move up again….
But maybe that’s my plan… Maybe i am really just long, but if I say the opposite of what I want to do, it will move the way I want to go.
CoronitaParticipant[quote=RoyceKemp]No problem, I love talking Real Estate.
I manage my own properties, except one in Oregon. I started out as a Computer Engineer and first buying real estate when I was in college. A few years ago I decided to get my Broker’s license and this year I plan to open a brokerage here in UTC that offers both Sales and Property Management.
So the typical clientele has been people in transition. I had a guy from Seattle move down because his company imports foods from Mexico and they bought a warehouse here in SD. He wanted to be closer to operations, and his daughter lives here. He wasn’t prepared to move all his stuff down since he was wrapping up a divorce, he stayed with me for 15 months.
Another couple stayed with me for 7 months, they work from home 6 months of the year, then travel. They literally just took off to go travel Europe. He said I might here from him again in six months. They sold all their furnishings when they decided on this lifestyle a few years back.
We aim for longer term, but obviously we want 100% occupancy so we’ll accept shorter terms.
Outside of the one furnished rental in UTC, I only do 12-month leases. That unit was a score, I already owned another unit in that complex so I was very familiar with it when that unit came up, I jumped on it. I also know that the HOA dues which are astoundingly high at $375/mon will come down to $200/month in about 2 years, so there will be a nice bump come that time frame (HOA was poorly managed in years past so we’re having to rebuild reserves).
The 3.99% was from a Credit Union in Ohio I found by shopping on the Internet. The timing was just perfect when it came to rock-bottom rates, as I had been searching for months for a property to pick up. I may have paid points, I can’t recall. I know I would have asked about the points and run the numbers to see if it was worth it, I’m a buy and hold investor.
Rates have gone up from the exceptional lows, but they are still LOW historically speaking. It wasn’t until 2009 that we ever dropped below 5%, EVER![/quote]
Thanks for sharing. Just curious. the UTC condo, is it a 2/2 or 1/1 that you’re getting $2k/month fully furnished on a 6-8 month lease roughly…
CoronitaParticipant[quote=RoyceKemp]I remodeled it with very high end fixtures and now rent it out as a furnished high end rental. So comparable market rent for the unit would be $1400/mo, but because of what I did to the property I get almost $2K/month on average (accounting for vacancy period). I cash flow about $300/month. It helps I put 20% down, and that I am on an ARM, so my interest rate is less than 3% right now, buy my principal balance reduces by $500 each month. With the extra cash flow I pay down the principal by another few K each year, so when rates climb again, I should still be in a cash flow position.
My best buy: In 2012 I bought a 2br condo in San Marcos for $115K. I cash flow on that unit $300/month right out the gate. it’s on a 3.99% loan for 30 years. Comps are going for $160K today.
I’m a buy and hold type of investor, so I focus on long term profitability. I’m okay with market fluctuations and focus on how to maximize returns with what I have, and the best way to do that is get and keep great tenants.[/quote]
Not to poke and prod but I’m just curious.
Regarding the UTC rental. You mention it’s a completely furnished condo. What is your typical clientele and roughly what is your tenant’s lease duration? And what is your vacancy rate looking like. From the sounds of if, it appears to be a a short(er )term rental..So I was just curious about it… Do you pick your own tenant or do you have someone that you work with that, for instance, does corporate reloc for you? Just trying to learn what others are doing….
Also ,regarding your San Marcos condo.. Sounds like it cash flows pretty darn good… Is it more of a longer term lease? Also, how did you manage to get a 3.99% 30 year fixed rate loan an rental? The best I was able to do was around 4.25% with almost no cost..When the loan balance is less than $150k, most lenders I talked to didn’t even want to do the loan since it was too small, and there was about a 1/2% penalty for being both a small loan and a rental property, if I recall. Again just curious..
Rates have gone up a bit, and I think the best that I’m getting quoted is around 4.4% with about $800 cost for around $100k loan. The best rate so far ends up being my HELOC at around 3%…
Just curious how it appears you manage to do things that other people say can’t be done…
Thanks for sharing…
CoronitaParticipant[quote=livinincali][quote=FlyerInHi]Where is almost as good for $100k less for a 1 bedroom?[/quote]
I don’t love it but how much different is Mira Mesa vs UTC?[/quote]
About $80-100k I think.
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