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Old 09-20-2016, 11:55 AM   #21
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Thx "Beaver"

Does this mean, given current math & assuming it holds, you would choose Option#3 (Rent ~20yrs, then convert to CRT)?
Basically yes, but given things change over 20 years i would reevaluate annually
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Old 09-20-2016, 12:09 PM   #22
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The below statement is not correct:
Also, is it an option to move into the rental for 1-2 years to establish your residency, and then sell it as your personal residence to avoid depreciation recapture? I'm not well versed in real estate, but I thought I remembered reading that if you have a rental property, then you could move into it to make it your personal residence for a certain number of years, then sell it as your own personal residence without the depreciation recapture

You have to pay depreciation recapture if the property sells for more than the adjusted basis. As far as the 500k exemption it is prorated based on total time rented vs lived in.
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Old 09-20-2016, 07:24 PM   #23
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You said that the property value (at the time of purchase, and now) is $200K. If you own 100% of the property, your capital (or equity) is $200K, and net ROC (or ROE) is 4.6%.

But......when you purchased the condo 10 years ago, did you pay for it in cash? Or did you leverage your investment? Because that makes a big difference to your return on investment, or ROI.

For example, let's assume that when you bought the condo, you put a deposit of $50K and took out a mortgage for $150K. Let's also assume that the mortgage payments were covered by the rent, and that the mortgage has now been paid off without any further injections of cash from you.

If all these conditions were to apply, your initial investment would have been $50K. Your current return on your initial investment (ROI) would be $9200/$50,000 = 0.184 = 18.4%.

This is why I am in no hurry to pay down principal on investment property mortgages. ROI is maximized by allowing the tenants to do that for you.
Meadbh-

The mortgage has now been paid off. While I wish that I had net income of $9,200/yr with only $50k invested & still carrying a mortgage, that is not the case. So, it's $9,200/$200k = 4.6% ROC/year.

If you are getting anywhere near 18.4% return on your property, more power to you!
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Old 09-21-2016, 09:40 AM   #24
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If you are getting anywhere near 18.4% return on your property, more power to you!
I wish! Currently I am in a cash flow neutral situation, with equity increasing by approximately 10% of my original investment per year. The remaining mortgages will disappear in ~4 years, 7 years and 14 years, leading to an increasing monthly cash flow.
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Old 09-23-2016, 09:40 AM   #25
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Thread bump to see if I can get any more input on the OP.
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Old 09-23-2016, 04:26 PM   #26
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I thought about that but, did not include it as an option because DW & I have no children and no goal to bequeath anything.

Given that, would you still do a 1031 exchange? If so, can you provide a NPV to demonstrate it's a better option?
Is your return after taxes or before? What tax rate are you paying on the rental income. You have had no appreciation in the property in 10 yrs?
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Old 09-23-2016, 05:42 PM   #27
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Is your return after taxes or before? What tax rate are you paying on the rental income. You have had no appreciation in the property in 10 yrs?
The return is before taxes but, it's sheltered by depreciatation. So, it's equivalent to an after tax return in my current retirement income tax bracket.

Appreciation has been very small since purchase; perhaps 10%.
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