Join Early Retirement Today
View Poll Results: Real Estate as an investment other than your home?
REITS baby! instant ability to liquidate, no toilet clogs. 49 28.00%
Vacation home that appreciates. 34 19.43%
DST or Opportunity Zone investor. 7 4.00%
Commercial/NNN investor. 14 8.00%
Bed and Breakfast/airbnb/VRBO owner. 10 5.71%
Live on the same lot as my rental. 4 2.29%
Own and rent out single family home(s). 57 32.57%
Own and rent out apartments. 28 16.00%
Own property as appreciating land or farmland. 13 7.43%
https://www.youtube.com/watch?v=WCOzqP9Dt9E 6 3.43%
No "investment" RE - just my home 37 21.14%
Multiple Choice Poll. Voters: 175. You may not vote on this poll

Reply
 
Thread Tools Search this Thread Display Modes
Old 07-22-2020, 04:28 PM   #61
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
calmloki's Avatar
 
Join Date: Jan 2007
Location: Independence
Posts: 6,638
Quote:
Originally Posted by ut2sua View Post
I didn't know this ^^^
I was thinking/guessing the IRS would allow me to subtract unused depreciation. Guess I was wrong.
My understanding, but verify.
Here's other guys on the internet:
https://ttlc.intuit.com/community/in...-18/00/595103#
__________________
"Be kind whenever possible. It is always possible." Dalai Lama
calmloki is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-22-2020, 05:18 PM   #62
Thinks s/he gets paid by the post
Cobra9777's Avatar
 
Join Date: Jul 2012
Location: Texas
Posts: 2,328
Quote:
Originally Posted by ERD50 View Post
...And as that NOLO article points out, cap gains are one thing, but depreciation recapture is another. This family has probably depreciated most/all of the original purchase price (I don't really know much of the details on depreciation, but I think that's ballpark). It appears the depreciation recapture (taxed at 25%!) is a major player, none of it is reduced by the time using it as a personal residence...
Just to clarify, unrecaptured Section 1250 gains (aka, depreciation recapture) are taxed at a maximum federal rate of 25%. It's taxed at ordinary income rates up to a maximum special capital gains rate of 25%. To the extent an unrecaptured Section 1250 gain falls into the 10%, 12%, 22% or 24% bracket, it gets taxed at that rate.

The details are in the tax worksheet in the instructions for Schedule D. Trying to understand that worksheet can be a mind-bending experience. But if you work through a simple example, it is clear that the recapture is taxed at ordinary rates up to a maximum special CG rate of 25%.

The nolo piece linked above is wrong; it is not a flat 25% tax. That's a fairly common misunderstanding which seems to spread like a virus across the internet, usually by CPA firms and lawyers who want to make it sound really big and scary, beyond the comprehension of mere mortals... presumably as a strategy to drum-up business.

I've sold two rentals with unrecaptured Section 1250 gains. I never paid anything close to 25% on the recapture, nor the balance of the gain for that matter, which is taxed at normal CG rates based on ordinary income.
__________________
Retired at 52 in July 2013. On to better things...
AA: 55% stock, 15% real estate, 27% bonds, 3% cash
WR: 2.7% SI: 2 pensions, some rental income, SS later
Cobra9777 is online now   Reply With Quote
Old 07-22-2020, 06:15 PM   #63
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 22,990
Quote:
Originally Posted by Cobra9777 View Post
Quote:
Quote:
Originally Posted by ERD50 View Post
...And as that NOLO article points out, cap gains are one thing, but depreciation recapture is another. This family has probably depreciated most/all of the original purchase price (I don't really know much of the details on depreciation, but I think that's ballpark). It appears the depreciation recapture (taxed at 25%!) is a major player, none of it is reduced by the time using it as a personal residence...
Just to clarify, unrecaptured Section 1250 gains (aka, depreciation recapture) are taxed at a maximum federal rate of 25%. It's taxed at ordinary income rates up to a maximum special capital gains rate of 25%. To the extent an unrecaptured Section 1250 gain falls into the 10%, 12%, 22% or 24% bracket, it gets taxed at that rate.

The details are in the tax worksheet in the instructions for Schedule D. Trying to understand that worksheet can be a mind-bending experience. ....
Yeah, it was bound to be far more complicated than my little blurb covered. It's disappointing to me that NOLO didn't cover it better, they're among the better sources out there, IMO. Thanks for the more detailed analysis.

-ERD50
ERD50 is offline   Reply With Quote
Old 07-22-2020, 11:30 PM   #64
Recycles dryer sheets
 
Join Date: Dec 2007
Posts: 240
Quote:
Originally Posted by Cobra9777 View Post
Just to clarify, unrecaptured Section 1250 gains (aka, depreciation recapture) are taxed at a maximum federal rate of 25%. It's taxed at ordinary income rates up to a maximum special capital gains rate of 25%. To the extent an unrecaptured Section 1250 gain falls into the 10%, 12%, 22% or 24% bracket, it gets taxed at that rate.

The details are in the tax worksheet in the instructions for Schedule D. Trying to understand that worksheet can be a mind-bending experience. But if you work through a simple example, it is clear that the recapture is taxed at ordinary rates up to a maximum special CG rate of 25%.

The nolo piece linked above is wrong; it is not a flat 25% tax. That's a fairly common misunderstanding which seems to spread like a virus across the internet, usually by CPA firms and lawyers who want to make it sound really big and scary, beyond the comprehension of mere mortals... presumably as a strategy to drum-up business.

I've sold two rentals with unrecaptured Section 1250 gains. I never paid anything close to 25% on the recapture, nor the balance of the gain for that matter, which is taxed at normal CG rates based on ordinary income.
Thanks for pointing this out. I think you are correct that many written articles out there mentioned the 25% recaptured tax without giving the full picture thus giving the impression that the 25% rate is regardless of the income level.
ut2sua is offline   Reply With Quote
Old 07-23-2020, 01:44 AM   #65
Moderator
 
Join Date: May 2007
Posts: 12,810
About 2/3 of my NW is in real estate (no mortgages). It's a mixture of residential (condos), commercial (office space), and land (farmland and forests). The residential and commercial properties give me regular income (no delinquency so far) while the land is my "lottery ticket". It is currently classified as "agricultural" but it borders a fast growing population center. If one day it is reclassified as "residential", the price would go up 100x overnight.
__________________
46 years old, single, no kids. Exited the job market in 2010 (age 36). Have lived solely off my investments since 2015 (age 41). No pensions.
Current AA: real estate 64% / equities 10% / fixed income 16% / cash 10%
FIREd is offline   Reply With Quote
Old 07-23-2020, 08:59 PM   #66
Thinks s/he gets paid by the post
street's Avatar
 
Join Date: Nov 2016
Posts: 4,441
Quote:
Originally Posted by FIREd View Post
About 2/3 of my NW is in real estate (no mortgages). It's a mixture of residential (condos), commercial (office space), and land (farmland and forests). The residential and commercial properties give me regular income (no delinquency so far) while the land is my "lottery ticket". It is currently classified as "agricultural" but it borders a fast growing population center. If one day it is reclassified as "residential", the price would go up 100x overnight.

Yes. That is a great investment avenue. It worked well for me if you can get it in the right price range.
street is online now   Reply With Quote
Old 07-24-2020, 07:22 AM   #67
Thinks s/he gets paid by the post
 
Join Date: Sep 2014
Location: The Great Wide Open
Posts: 2,689
Quote:
Originally Posted by FIREd View Post
About 2/3 of my NW is in real estate (no mortgages). It's a mixture of residential (condos), commercial (office space), and land (farmland and forests). The residential and commercial properties give me regular income (no delinquency so far) while the land is my "lottery ticket". It is currently classified as "agricultural" but it borders a fast growing population center. If one day it is reclassified as "residential", the price would go up 100x overnight.
Our rental SFH is 300' from the local hospital and during the court required county property reassessment, its designation went from "residential" to "medical". Taxes went from $679/year to $1980/year. Hopefully the resale value will go up that same rate.
__________________
Give me Liberty or give me Death. Patrick Henry
Winemaker is offline   Reply With Quote
Old 07-24-2020, 01:44 PM   #68
Full time employment: Posting here.
MrsHaloFIRE's Avatar
 
Join Date: Jun 2018
Posts: 751
We own one rental SFH. Tenant has been paying but it seems later every month. Unless prop mgmt co is holding the rents for cash flow (?) If other tenants they !manage aren't paying, prop mgmt not getting paid for them.
MrsHaloFIRE is offline   Reply With Quote
Old 07-24-2020, 04:28 PM   #69
Recycles dryer sheets
 
Join Date: Aug 2011
Location: Atlanta
Posts: 459
Quote:
Originally Posted by calmloki View Post
Really have no idea what percentage of the early retirement crowd are invested in real estate other than their home - so here's an attempt at a poll. Feel free to check as many of the options as apply and if you gotta then fill us in on why your choices are the best in the whole wide world - for you. This is a chance for us real estate junkies who don't know where to put our investment in Firecalc to see that there are a few property mavens out there.
Had 2 homes 9.2002 to 2.2020 we ended up moving into our vacation home
currently down to 1 rental home , same tenant 19 years
Had around 10 at one point.
Never really had a problem.
One person was "so great" that we didn't run a credit check. Was only tenant that we ever evicted.
For our lifestyle we have all the money we need and it seemed tenants left when we wanted to go on vacation is the reason we got out of it.
For the money we made it was easy work but it is one of the few things
that im good at (being a landlord)
SJ1_ is offline   Reply With Quote
Old 07-24-2020, 04:46 PM   #70
Recycles dryer sheets
 
Join Date: Oct 2014
Posts: 70
I have two SFH’s that I plan to keep well into retirement. I’m probably 7 years from FIRE, so I’m actually looking for one or two more SFH’s.

Unfortunately in Texas, house prices have skyrocketed. Hard to find SFH investment properties right now (the low interest rates have driven up demand).
2cheap2eat is offline   Reply With Quote
Old 07-24-2020, 04:56 PM   #71
Recycles dryer sheets
 
Join Date: Jun 2017
Location: Punta del Este
Posts: 311
One tenant was furloughed from his job. Asked for and received a 20% discount for 3 months and is back to work and full pay. Another asked to break his lease and paid until a new tenant was signed. Basically he gave notice on the 5th and new tenant was in the 1st of the following month. Nothing lost Beyond the cost ps involved in signing up the new tenant.

The AirBnB which is the vacation home is doing unbelievable business!
Retired Expat is offline   Reply With Quote
Old 07-24-2020, 06:36 PM   #72
Recycles dryer sheets
 
Join Date: Nov 2011
Location: West Plains
Posts: 117
We have 5 duplexes--10 units. Owned since 2012 and all paid for in full. The monthly cash flow is great. We maintain them as if we had to live in them ourselves, so we're getting a reputation in our town for being very responsive landlords. We get calls almost every week from people hoping we have an available unit or one coming up.

We've had to do 2 evictions, one because the tenant who was in the unit when we bought the duplex had her two adult sons return home to live with her and then she moved away without telling us, leaving her drug-dealing devil's brood in possession of our property. Befriending lawyers and law enforcement ensued. They destroyed the place before they left and it cost around $35K to bring it back to our standards. Fortunately, our insurance covered the bulk of this since law enforcement ruled the damage malicious. The other eviction happened because we were stupid and gullible and thought we could tell when someone was lying to us. We chased this couple for chronically late rent for a couple of years and finally got tired of their ridiculous excuses. Interesting side note: All the tenants we evicted are now doing time either in prison or the local jail.

Now we thoroughly vet applicants for credit and criminal history and usually have multiple candidates to choose from. We are kind, but firm and begin as we mean to continue. We charge a $25 late fee and the first time it happens, we tell the tenant if it happens again, we'll start eviction proceedings. We're not going to chase anyone for rent anymore. We'd rather hire an attorney and get them out. It's less stressful. The firm no late clause works. Case in point. Our newest tenants were late in their 2nd month with us. We explained our late rent policy and they've already paid for August a week early.

My heart goes out to landlords who find themselves in areas where a "rent holiday" and eviction moratorium have been imposed. It's not fair. At the same time, we try to be aware of our tenants' situations. The one who's been with us the longest lost his job at the beginning of the Covid-19 shutdown. We offered to forgive the rent, but he only needed 1/2 of one month's grace before unemployment kicked in. All our other tenants are in essential positions.

We appreciate our tenants very much.
Maidensong is offline   Reply With Quote
Old 07-24-2020, 06:38 PM   #73
Dryer sheet wannabe
 
Join Date: Sep 2015
Location: Cary
Posts: 22
Most of my Networth is in real estate notes, none of the above listed real estate classes. I kind love that, means that I am still a niche player. I hold the first position lien and deed of trust on fix and flip properties. Just sold my last 5 rentals, had a 20% cash on cash return on these over the years, but is was small money. The lending market is a great place to make some good returns, In great stock market years, I underperform, but in bad market years I don't loose money.
HaveEnough is offline   Reply With Quote
Old 07-24-2020, 07:04 PM   #74
Recycles dryer sheets
 
Join Date: Apr 2018
Posts: 221
As someone saving for first investment property down payment:
-how much work is the first investment property while working full-time (40hr/wk)?
-Do you use a management company or do they take too much money and it's manageable?
-STR or LTR?
-Was your first investment property your previous primary residence?
FIREarly is offline   Reply With Quote
Old 07-24-2020, 07:12 PM   #75
Dryer sheet wannabe
 
Join Date: Sep 2015
Location: Cary
Posts: 22
My first investment property was a previous primary residence.
I used property management companies for the others, it is still work managing the manager. A bad one will rip you off, fees for everything, don't care about your money only profit.
Mine were all long term.
I owned mine while still working, with the management company it was not difficult, just have to watch every bill, every repair and give them as short a leash as possible. For example, they will want a $300-$500 repair amount that they will not call for and it is automatically approved. I had a management company break up a plumbing bill into two so they did not need approval. I have also had three of these on the same property in a month.
HaveEnough is offline   Reply With Quote
Old 07-25-2020, 05:45 AM   #76
Recycles dryer sheets
 
Join Date: Nov 2011
Location: West Plains
Posts: 117
We used a bonus from my DH's job to fund our first rental property's down payment. At the time we lived in another state, but knew we wanted to RE in the town where the rentals are located. Since we were distance owners, we used property managers until my DH chucked his job and we moved to our forever home. Some managers were better than others, but none of them were total disasters or dishonest with us. They received 10% of rent collected each month.

We've managed all 10 units since mid-2014. Usually it doesn't take much time. We hire a lawn service at the ridiculously low price of $85 to mow all 10 units. We have established a list of trusted tradesmen--plumber, contractor, painter, electrician, HVAC etc--and use them instead of trying to jerry-rig things ourselves. Toward the end of the month, the DH puts together a "rent letter" because believe it or not, some folks forget that rent is due EVERY month. Half of our tenants pay their rent electronically through Cozy.co which is a great free service that pulls the funds out of their account and deposits it in ours. We can see when they have initiated payment and know its coming. The other half take their rent payment to our bank and deposit it there. We receive deposit slips by mail from the bank to verify payment. Very occasionally, a tenant will bring their rent to our home.

I'm intrigued by HaveEnough's real estate loans. I assume these are single family homes. I wonder what would be involved in turning duplexes into townhouse type properties so each side could be sold individually...

Are there are laws restricting private lending? It's an interesting idea I'd like more info about for on down the road. Any good websites with info on this?
Maidensong is offline   Reply With Quote
How many are Real Estate investors/landlords?
Old 07-25-2020, 06:10 AM   #77
Full time employment: Posting here.
 
Join Date: Nov 2013
Posts: 740
How many are Real Estate investors/landlords?

Quote:
Originally Posted by FIREarly View Post
As someone saving for first investment property down payment:

-how much work is the first investment property while working full-time (40hr/wk)?
It depends, if it needs a lot of work or not. If you are hiring fixing out it is still some work, but less so than if doing everything yourself.

We do not use a management company, our properties are all LTR and we have 5 multi families currently.
Management companies usually want to take as much as possible, but some are good. I have self managed up until now on top of 40-50 hour work week. I recently reduced to 80% because my 5 properties make up for more than the 20%.

Our first property was not our primary. If I had started out earlier (before kids) that would have been the route I would have taken. Much more favorable down payment terms and interest rates. I would probably still favor multi family rather than SFR.

Good luck, landlord if has been very good to us so far.
NgineER is offline   Reply With Quote
Old 07-25-2020, 06:15 AM   #78
Full time employment: Posting here.
 
Join Date: Mar 2014
Location: Dallas
Posts: 676
Quote:
Originally Posted by HaveEnough View Post
My first investment property was a previous primary residence.
I used property management companies for the others, it is still work managing the manager. A bad one will rip you off, fees for everything, don't care about your money only profit.
Mine were all long term.
I owned mine while still working, with the management company it was not difficult, just have to watch every bill, every repair and give them as short a leash as possible. For example, they will want a $300-$500 repair amount that they will not call for and it is automatically approved. I had a management company break up a plumbing bill into two so they did not need approval. I have also had three of these on the same property in a month.
I always joke that it's either owner who makes money or the management company! I have always managed my own rental and so far it has been a smoother ride.
pjigar is online now   Reply With Quote
Old 07-25-2020, 06:18 AM   #79
Full time employment: Posting here.
 
Join Date: Mar 2014
Location: Dallas
Posts: 676
[QUOTE=NgineER;2462058]
Quote:
Originally Posted by FIREarly View Post
As someone saving for first investment property down payment:

-how much work is the first investment property while working full-time (40hr/wk)?

[/QUOTE It depends, if it needs a lot of work or not. If you are hiring fixing out it is still some work, but less so than if doing everything yourself.

We do not use a management company, our properties are all LTR and we have 5 multi families currently.
Management companies usually want to take as much as possible, but some are good. I have self managed up until now on top of 40-50 hour work week. I recently reduced to 80% because my 5 properties make up for more than the 20%. Our first property was not our primary.

If I had started out earlier that would have been the route I would have taken. Much more favorable down payment terms and interest rates.

Good luck, landlord if has been very good to us so far.
SFH are much less demanding for management. Must-family takes more time both due to number of units as well as churn. I haven't been to any of my SFH rental over a year. May be a call here and there for setting up remote work orders.
pjigar is online now   Reply With Quote
Old 07-25-2020, 06:25 AM   #80
Thinks s/he gets paid by the post
 
Join Date: Sep 2014
Location: The Great Wide Open
Posts: 2,689
Quote:
Originally Posted by FIREarly View Post
As someone saving for first investment property down payment:
-how much work is the first investment property while working full-time (40hr/wk)?
-Do you use a management company or do they take too much money and it's manageable?
-STR or LTR?
-Was your first investment property your previous primary residence?
1) Great initial work/planning helps mitigate future time. My w*rking schedule back in the day was 22/28 12 hour days. 6 days off in 4 weeks; not necessarily weekends or holidays, so I made sure I didn't have any midnight calls. We purchased a duplex in May 99, and got to work. We replaced all valves, supply lines, faucets, drain lines, fill valves in both sides. Put R38 insulation in attic, caulked all woodwork to make clean seams when painting, replaced all flooring and carpet. Made all windows operable and airtight when closed, painted everything with good paint not cheap stuff. Started taking applications that August. Rarely do we ever get calls, but I cut the grass when needed, to make my presence known that I'm watching my property. If I see someone, I ask if anything need done or fixed. Most of my tenants stay with me for years, if and when they move, I repeat the above, but would replace 3-4 windows with Andersens each vacancy.
2) No management company ever.
3) No, we purchased unit as an investment property.
4) The units coin money.
__________________
Give me Liberty or give me Death. Patrick Henry
Winemaker is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Real Estate Investors - paying my young kids, so they can fund a Roth Aiming_4_55 Other topics 33 07-23-2017 08:48 AM
Question for the Real Estate investors out there harley FIRE and Money 42 09-05-2011 05:19 PM
Real Estate Agent in Down Real Estate Market TromboneAl Other topics 4 06-09-2007 10:20 AM
Appraisal issue. Need some advise from real estate investors. xmanz3 Other topics 15 04-22-2007 06:32 PM
Real estate investors who have gone before: some thoughts please? calmloki FIRE and Money 33 02-01-2007 06:05 PM

» Quick Links

 
All times are GMT -6. The time now is 08:47 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.