Aslowdodge
Recycles dryer sheets
Ok . While I will argue that real estate CAN be passive while most here say it is not, I will admit the op did come across as bragging a bit which could irritate some people.
Passive income = the best
- Thread starter 97guns
- Start date
Ok . While I will argue that real estate CAN be passive while most here say it is not, I will admit the op did come across as bragging a bit which could irritate some people.
youbet
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Actually ANY money making endeavor might be considered passive depending on the circumstances and your definition of "passive."
A bit?
OP
OP
97guns
Full time employment: Posting here.
I never said anything about a free property manager, believe me.... it was free I’d be “bragging” about it big time
ERD50
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Nor did I.
At any rate I have no idea why you started this thread in the first place. I guess you like your rentals. Great. It's not for everyone, for a variety of reasons. So what?
-ERD50
OP
OP
97guns
Full time employment: Posting here.
Moderator, please delete or close the thread my argument here is futile, it’s just getting me chewed up by this pack of dogs.
OP
OP
97guns
Full time employment: Posting here.
Just started it for the same reasons other members start their investment threads, please close it with your authority
ncbill
Thinks s/he gets paid by the post
Well, how much do you pay them, then?
From what I've read you don't make money (i.e. a decent cap rate) with residential real estate if you have to hire a professional property manager.
We've had enough problems with property managers at our HOA to make me believe the above.
From what I've read you don't make money (i.e. a decent cap rate) with residential real estate if you have to hire a professional property manager.
We've had enough problems with property managers at our HOA to make me believe the above.
ERD50
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I have no authority to close the thread. Not sure what makes you think so.
And I've never seen any Couch Potato investor start a thread bragging that they are going on vacation, and the money just keeps coming in from their investment with no involvement from them (So? It's expected.). And I've never seen any Couch Potato investor title a brag thread like that with something like "Couch Potato = the best".
Here's a tip: If rentals work for you, just say so, and explain why. I'm sure they have worked well for many people, but it simply is not attractive, for many reasons, to many (probably most) other people here. By claiming they are the "best", you are asking for push back. And then you get upset when you get that push back?
It's not a good look on you.
-ERD50
Offgrid Organic Farmer
Full time employment: Posting here.
I took a 10-year break from rental real estate. The last time I delved into it, the IRS said you need to be doing the day-to-day stuff yourself and that makes it a non-passive activity.
I am going back into rental real estate now with the assumption the IRS has not changed on this issue.
Offgrid Organic Farmer
Full time employment: Posting here.
From my previous rental real estate properties, my experiences were that hiring a property manager kept the activity from showing any profit. AND more importantly to me, was that by hiring the property manager it shifted the activity away from being a 'non-passive' activity, so I could no longer use it to shelter my salary income.
Aslowdodge
Recycles dryer sheets
I'm not sure where you've read this. I know a fair amount of people making money using property managers. Several retired from the income from rentals -no 401 or ss as they are too young to collect. The average they get charged is 6 to 10% of the gross rents.
I have 22 properties with a average cap rate of 14.4 and that includes the cost of professional property managers.
I have no income except for real estate rental income professionally managed and that property is all located over 800 miles away from where I live making self managing quite difficult at best. I make more than when I worked.
I also can't understand how a problem you have with your personal residence HOA translates to proof that profitability on rental properties using a manager is impossible.
Aslowdodge
Recycles dryer sheets
Can't say for sure, but it sounds like you want to be classified as a real estate professional which has a set of conditions such as you must be working at least 750 hours a year and if you have a job you must spend the majority of your time in real property businesses.
I believe passive income here is being referred to as to how much time is spent by the person versus your idea of the IRS classification for tax purposes. According to the IRS unless you are a real estate professional real estate is passive income.
Now the argument on this thread is having rentals truly passive. People who self manage it's not so much when compared to retiring with a pension. People like myself with 12 to 24 hours a year working the rentals-mostly booking for year end taxes will say that the low amount of time per year is close enough to passive.
ncbill
Thinks s/he gets paid by the post
https://johntreed.com/blogs/john-t-...9355075-real-estate-investment-misconceptions
Same issues (with property managers for our HOA) as he mentions...at least for residential (not commercial) real estate.
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Aslowdodge
Recycles dryer sheets
You do know he makes a living being the contrarian to all real estate gurus. right? My friend met this guy as he lived locally to where I am from.
Based on your link all it says is "The property-management industry has few happy customers. Neglect and kickbacks are near universal in the fee-paid property-management industry. Manage it yourself or hire your own salaried managers to do it."
Like every industry there are good and bad people and his generalization is so broad and without factual basis. I've had poor property mangers and I've have had good property managers.
My 14 cap rate runs contrary to your experience with you HOA. Other real estate investors I know using managers and making money like myself has me believing the opposite of what you claim. So I am using what I experienced in real life as well as other retired real estate investors versus what you've read. Sorry, I give more credibility to what I am experiencing versus an online guru who makes his money selling his opinion.
How does your HOA compare to my property manager taking all my profits? Can you cite examples? I've seen people claim online how evil the HOA was and were in business to make money for themselves. They didn't understand that the HOA represents them to keep up the properties and the HOA does not make money. Do you go to your board meetings and have you reviewed the budget.? A lot of people forget the money is set aside for repairs like roofs etc. The HOA is not there to make a profit so how can you say the property management company is keeping them achieving a profit?
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Another Reader
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As I understand it, the IRS classifies you as one of three types of investors.
Passive. You can deduct all expenses up to the amount of income you receive.
Passive with active involvement. You can deduct an additional $25,000 of expenses against other taxable income.
Real estate professionals. You can deduct all of your expenses against taxable income.
Actively managing your own properties only gets you to being passive with active management unless you can meet a high standard of involvement. It does not inherently qualify you as a real estate professional. From Publication 527:
You qualify as a real estate professional for the tax year if you meet both of the following requirements.
More than half of the personal services you perform in all trades or businesses during the tax year are performed in real property trades or businesses in which you materially participate.
You perform more than 750 hours of services during the tax year in real property trades or businesses in which you materially participate.
My CPA says the IRS like to challenge taxpayers on this.
Passive. You can deduct all expenses up to the amount of income you receive.
Passive with active involvement. You can deduct an additional $25,000 of expenses against other taxable income.
Real estate professionals. You can deduct all of your expenses against taxable income.
Actively managing your own properties only gets you to being passive with active management unless you can meet a high standard of involvement. It does not inherently qualify you as a real estate professional. From Publication 527:
You qualify as a real estate professional for the tax year if you meet both of the following requirements.
More than half of the personal services you perform in all trades or businesses during the tax year are performed in real property trades or businesses in which you materially participate.
You perform more than 750 hours of services during the tax year in real property trades or businesses in which you materially participate.
My CPA says the IRS like to challenge taxpayers on this.
Aslowdodge
Recycles dryer sheets
Exactly, many people fail to meet the qualifications to be considered a re professional so The IRS is all over that one. If you make the claim you better have good provable documentation. I heard one person tried this and the IRS looked over her credit card statements and saw she was vacationing in France at the same time period she claimed she was working on a property.
Another Reader
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750 hours is tough to prove for most real estate investors. That's why most people that claim real estate professional status are agents or brokers that are engaged in selling properties as their employment.
Another Reader
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Why not leave it open? The discussion is getting interesting.
Next up: Anyone able to take advantage of the 20 percent net income exclusion in the new tax bill?
Huston55
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Aslow-
Pls reconcile these two sets of numbers for us; they don’t seem to match. But, perhaps my math is wrong.
I did a quick Zillow/NeighborhoodScout search on Marietta, and it seems to be a RE market with profitable rental property opportunities available (without getting assaulted/robbed when collecting the rent). So, I’d also like to hear more about how you’ve built what you consider a profitable rental RE portfolio. Stuff like:
- Purchase $ vs Monthly Rental ratios you look for
- Property types (SF, Multi-unit, etc)
- Source of properties (market, auction, etc)
- What Net/Gross Rent ratio you try to achieve
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corn18
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I don't have a beef with 97guns making money on RE and telling us about it. I guess my issue is a personal one in that his hubris makes me not like him. This post pretty much sums up what I think 97guns thinks of me:
"is working 40 years and achieving Fire really an accomplishment? 40 years of service, 1/2 your life, to be taken care of for the remaining 15 or 20 years of it? Is that really “retiring early”
Not intended to demean anyone, just a viewpoint from someone whom literally Fired off 12 years in the workforce and hit a couple very meaningful home runs"
Then I get defensive and post mean things.
"is working 40 years and achieving Fire really an accomplishment? 40 years of service, 1/2 your life, to be taken care of for the remaining 15 or 20 years of it? Is that really “retiring early”
Not intended to demean anyone, just a viewpoint from someone whom literally Fired off 12 years in the workforce and hit a couple very meaningful home runs"
Then I get defensive and post mean things.
ncbill
Thinks s/he gets paid by the post
Sorry I wasn't clear. I'm on the board of our HOA and have been for years.
I meant that we've had the same issues with neglect (& suspected kickbacks) with various property managers over those years that Reed notes.
trumpeting_angel
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I’m still w*rking in a salaried position, and the primary advantage of my rental properties is in tax reduction. The mortgages are being paid down, and there will be pension-like income starting at age 72. I stopped making income once I hired a management company; there isn’t a big enough margin. Probably some bad luck recently (Long time problem tenant refusing to pay, finally left trashed apartment), but I am tired of it. I’ve saved many thousands in taxes annually, which is nothing to sneeze at. I dunno. I wouldn’t urge anyone to do it who isn’t drawn to it, and who doesn’t want to manage it personally.
Aslowdodge
Recycles dryer sheets
Ah, I see your point. Have you now found one that seems honest?
Aslowdodge
Recycles dryer sheets
That's the key, your margin. But do you feel the property manager is responsible for the run of expenses you now have?
He loves to humble brag...which is gross. He also gets very defensive when someone says anything other than how awesome real estate is. Its the reason he was banned from his other home.
