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(former)FormerSanDiegan
ParticipantAnother reason to use a PM …
Participant[quote=spdrun]The way to do it is clear, just not legal. Keep “living” in the unit…[/quote]
Independent of the legality, treating the rental as a primary may or may not be beneficial.
It depends on your ultimate goals for the property.
If you are going to hold for your lifetime to provide retirement income and pass to your children it makes no sense to continue to treat it as a personal residence for a future tax break on the sale that your heirs would get anyway.
One of the advantages to rental real estate is having the potential for tax sheltered income due to paper losses.
Here are some issues:
1. You cannot depreciate the property or upgrades
2. You cannot deduct insurance, maintenance, utilities between tenants, advertising costs.
3. Limitation on tax deductible interest to $1 Mil.
(If you have two $600k loans you can’t deduct the full amount.
4. AMT limitations on the property tax deductibility.There are probably a lot of other issues to consider.
Not saying that it’s better to treat as a rental for all cases. But there are plenty of scenarios where cheating and treating as a primary may not even pencil out.
ParticipantYou’re welcome.
ParticipantHere’s what I do to cope with BG’s posts (at least in those cases where I decide to read all 5 chapters).
Just imagine the writing in the voice of Andy Rooney.
Better yet, picture Andy Rooney saying these things she writes. It’s much more enjoyable this way.
Here’s an example to help you visualize (or audialize?)
Participant[quote=spdrun]It’s a farkin’ 1/1 condo. How much “management” is actually needed, other than finding tenants? As far as basic maintenance, either find a tenant who’s somewhat handy, or put a clause in the lease that all repairs < $300 are on the tenant. (i.e. the if-the-toilet-is-plugged-plunge-it-yourself rule). Added benefit is that a management company is required to withhold an excessive amount of taxes in CA, whereas a tenant could just mail checks directly to you out of state. (And yes, you're still expected to pay taxes, but better to PAY than give the pigs in Suckremental a free loan for 12 months.)[/quote] Sure it's only a condo... But how do you screen for a tenant that is handy when you live out of state ?
ParticipantI don’t really agree with the suggestions above, especially if you will be in another state.
I live about 130 miles from my rental property and I have used a property management company in San Diego since 2000. American Heritage properties
renthomes.comThe 10% fee for me well worth it.
Those you want to spend all the time and energy necessary to operate yourselves to save $100 a month or so, then you have more time and energy than me.Participant[quote=bearishgurl]
… I don’t believe the same success can be had today with becoming a small-scale landlord in CA that one could have had buying investment RE in decades past. This is mostly due to much higher purchase prices today and therefore much higher taxes and carrying costs. Your “cautionary advice” about leaving a few Mil around for retirement (or at least 1 mil, if one is considering trying their hand at landlording) is solid.
I don’t think the financial success of 30+ year LL’s (to the degree they were successful given their actual financial investment) can be repeated today by ~new LL’s … anywhere in CA. They hung in for the long haul, through thick and thin, no matter what happened in their lives. Most of them managed their own rental properties and that is to be commended in my book.
Today’s new LL’s are untested for the long haul …. and frequently have 10x the carrying costs of pre-Prop 13 LL’s. In addition, those “old school” LL’s did most of all of the labor on their rental properties, thus saving themselves many thousands over the years and most of today’s LL’s likely do not.
[/quote]I think that anyone who locked in a mortgage payment on rental property at market value (e.g. did not grossly overpay) in the last year or so will do quite well.
They locked in at a low price in the real estate cycle at rates that likely translate into positive cash flow on day 1. There have been few times in the last 40 years in San Diego when one could have pulled this off. And no period as favorable as the last year or so.
Just look at Rich’s house payment to rent ratios. Which he says he will update soon.
Participant[quote=earlyretirement]Yep. You can’t keep printing endless supplies of money with NO consequences. It can last for a little while but there WILL be a day of reckoning and you just have to be prepared for it.[/quote]
There will be a day of reckoning. The real quesiotn is how long until that day comes and will it matter to me.
Consider the Japan example…
Suppose you were a bright, intelligent 45-year-old, there when their interest rate dropped below 1%. You know that Japan can’t keep the rate near zero forever, so you start positioning for the eventually consequences.Rates dropped below 1% in Japan in 1995.
That person that was 45-years old when rates dropped below 1% is still waiting … and they are now age 62. They would have spend nearly the second half of their career in a less than 1% interest rate climate.
SO, while I believe that one should have some hedges against scenarios where rates turn around, inflation runs rampant, one should also be prepared for those things to not happen in a time-scale of their productive lifetime.
February 28, 2013 at 11:55 AM in reply to: Why American is failing to prepare for their retirement? #760218Participant[quote=The-Shoveler]If you were fully invested in stocks in 2000,
your just about even now, woowhooo.[/quote]
You are incorrect.
A portfolio invested in the S&P 500 or a 60/40 mix of stocks and cash since 2000 would not be even today.I rolled over an IRA in early 2001 and kept 60-70% in stocks, mainly S&P 500 index, the rest in mainly short-term bonds, cash and a sprinkling of REITS.
I started with ~$51,000 in Jan 2001. Added nothing through August 2012 and at that point the account was worth ~$77,000 (after that I rolled over another 401k into it so I no longer really know what the return is, but the market is up 5-7% since August).
During that period Dec 31, 2000 to August 31, 2012 the value of the S&P 500 went up by only 7-8%.
So, why did my account grow by about 50% from the end of 2000 to ~ end of 2012, when the market went up by only 7 or 8% ?
Was I some sort of genious or something ?
No, the answer is simple: interest and dividends.
It takes a dividend + interest rate of about 3.5% on average over that 11-12 years to make the portfolio grow by 50%.
Participant[quote=earlyretirement]I posted an update earlier today but see it’s now deleted. Anyone know why? Is there some bug on the site or did I post something not allowed? Just curious.
I was just responding to a comment. I don’t think I broke any rules but if so I’d love to know so I don’t do it again. I was just mainly speaking about high prices in Brazil and crime rates.[/quote]
I believe that this old thread (started in 2011) was revived by a spam post.
Any replay to a spam post (done by clicking the “reply” button directly associated with that post) will be deleted if the spam post is deleted.
So, if a thread is revived by a spammer (sometimes these result in interesting revisits of the topic, which is a funny benefit of the spam) it’s best to click the “add a comment” button associated with the original post so that content is not deleted with the spam.
Participant[quote=Rich Toscano][quote=barnaby33]
On that note though, does anyone have a strong opinion about when interest rates will rise, because that is the driver of all of this. [/quote]Anyone who “knows” the answer to this question is delusional or a liar…[/quote]
Interest rates will rise ~ April 1, 2014.
Participant[quote=barnaby33]This has happened multiple times. Sometimes for the better. Anyone want Powayseller back? Lots of people came and went, some stayed.
I think all the other angles have been covered and I’d just say, yeah, what afx said.
Oh and in case I forgot to come out of the closet, I bought a townhouse/condo in Mission Valley.
Josh[/quote]
… powayseller, Trader Chris aka Chris Scoreboard, docteur, Bugs, PD, PerryChase and jg. Lot’s of fun between those folks, not to mention sdr and powayseller going at it. That was back when flu’s name was FatLazyUnionGuy or something like that.
sdr and powayseller certainly provided a lot of entertainment back in the day.
February 22, 2013 at 8:48 AM in reply to: OT: Official. AN is now under conservatorship care of FLU….. #759965ParticipantThat’s funny… So if we see a post from AN, that is really flu and vice versa, or are you guys treating the account password like a chastity belt key ?
… wait, who is going to answer.
Participant[quote=spdrun]Why would a seller give a flying spaghetti frig about some sappy letter? It’s a commercial transaction. The purpose is to obtain cash. The firstest with the mostest wins this game.
The people writing the letters should save their time.[/quote]
Logic would agree with you.
However, there are a large chunk of buyers and sellers who rely more on emotion than logic in home price transactions.
Consider the family who is being transferred and selling their house where little johnny learned to walk, with pencil marks on the door frame marking his height each birthday. These people will react differently to these letters than say a rental property owner who is selling.
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