We really like a good spirited discussion, but we really hate personal attacks.
As long as we all remember that, this thread can remain open.
As long as we all remember that, this thread can remain open.
I’ve become disillusioned with property managers after 16 years of property ownership. The first one was incompetent, and the second one did a superb job but seems to have taken on more work that he can handle.That's the key, your margin. But do you feel the property manager is responsible for the run of expenses you now have?
Good thought!there is an ignore function
I’ve become disillusioned with property managers after 16 years of property ownership. The first one was incompetent, and the second one did a superb job but seems to have taken on more work that he can handle.
I did make money when I self-managed, but I moved too far away to continue this.
Thee properties have both appreciated considerably, and one will be paid off soon, so I shouldn’t complain. Like w*rking, it doesn’t hold the allure and passion it once did.
Maybe I'm wrong here but don't you have to take depreciation otherwise the IRS will do it for you?Does it have to be set up before purchase of the property? Property tax and depreciation are of little use to me due to current default income, so I have taken none. I only have the one property and it is basically just buying itself. It would be worth more to me if I could Roth the income.
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
I don't know if the IRS will do it for you, but I believe if you ever get audited they will recalculate you returns with it then recapture it when you sell.Maybe I'm wrong here but don't you have to take depreciation otherwise the IRS will do it for you?
I would prefer to sell but I’m afraid my accountant will yell at me.Thanks for pointing out the value of depreciation in shielding other income.
So will you sell or 1031-exchange into another real estate investment?
Whoops made a mistake. The cap rate is for the 17 properties I hold in my name only, the other 5 are held in my retirement accounts.
I try for the 2% rule which basically is 2% of the all in price for monthly rent.
When I cash out refinance you can see I have less invested and because of leverage my return is way higher. Because of 2 cash out refinances my roi has gone up
So at this point I have about $750K of my own money invested with 2 cash out loans. The value of the 17 properties is a skoosh under 1.5 million.
The gross rents are 216K with a net of $108K after all expenses per year.
108,000/750,000= 14.4
I have enough to live on comfortably so I may stop buying soon. I have a few more cash out refinances which will raise that 14.4 that I'm doing because interest rates are still relatively low. But with rates going up and returns going down I may just stop.
Hope that makes more sense.
Aslow-
Thx much for supplying all the details & kudos on your successful RE venture.
I like the “2% Rule”. Definitely hard to find almost anywhere now but, you bought after the RE crash when the opportunity was there...well done.
I now understand how you calculated what you called a “Cap Rate.” It’s actually the “Return one Invested Capital” (ROIC), whereas the Cap Rate would use current market value, making your Cap Rate ~10%. But, by either calculation, you’re doing quite well.
Plus, the tax advantages of your RE income make it even more attractive when compared to alternate investments.
I know there are several other Rental RE gurus on the forum (‘Senator’ is one who comes to mind). It would be interesting to hear what ratios they use and/or earn.
Wow some concerns here. When you sell your house you have to report the value minus any depreciation that you did or could have taken. They don’t recall and give you credit - they just charge you for it.
In Texas you can’t refinance a rental property - dunno about elsewhere.
As has been discussed numerous times - finding some unique deals due and making a profitable return can’t widely be applicable. I made a ton of return on stock I bought at the bottom of the recession but I don’t advise that to others. Likewise I bought a house right after the housing crash but that option isn’t available.
I see 2 parts here 1) buying houses and flipping them and 2) renting them out. If you buy a distressed rental and repair it for $60k and it is now worth 92k you made 50%
Now you are renting out your 92k house for $680*12 about 8k/yr. So assuming you have no repairs or any unexpected expenses (yes right) you make 9% on the actual renting part. Probably less as the house has appreciated since.
Sounds like you would be better off flipping houses and investing those profits into stock market.. but that sounds an awful lot like Work
I don't know if the IRS will do it for you, but I believe if you ever get audited they will recalculate you returns with it then recapture it when you sell.
I only meant the recapture was done when you sold, but since you haven't sold, it hasn't happened.I was stationed overseas for a few years, so we hired a property manager. He bungled things so badly, that we could not file our income taxes.
We requested all the data the IRS had on us for those 3 years, and then we requested audits for those years.
They recalculated our returns with depreciation included. But there was no recapture in it. No taxes were due.
We refinanced that apartment complex and used the cash to buy our retirement farm.
I only meant the recapture was done when you sold, but since you haven't sold, it hasn't happened.
Sorry the prop manager bungled things up, that had to be a PITA.
My apology. Whenever I try to tell our whole story, people get confused. So I am trying to learn to be brief.
My previous post in this thread takes us from 1997 up to about 2005.
2006 and 2007 we had rental income and we were once again paying down the mortgage. We were living on our farm and things were great.
2008 the city big employers had huge lay-offs. We lost all our tenants.
2009 we covered the mortgage from savings, until our savings ran out. We tried a short-sale but the bank refused. We tried to quit-claim deed the apartments back to the bank, but they refused. The bank then foreclosed on the mortgage and sued us for the market value of the property. This forced us into bankruptcy.
In the bankruptcy, the bank was forced to take the apartments, and to stop the foreclosure and the lawsuit.
It also exposed them for failure to do all the paperwork back when they gave us the mortgage, as it turned out they did not have a clear claim to the property as we thought they should have had.
We kept our farm, and we did not owe them anything further.
2010 - 2016 We were on our farm, doing the farm thing.
2017 we bought another apartment building and began remodeling it. It initially had one tenant.
2018 After substantial remodeling we now have four fresh tenants. By the end of the year we will have fourteen tenants.
Does that make any sense?
I have not seen any IRS recapture.
Wow some concerns here. When you sell your house you have to report the value minus any depreciation that you did or could have taken. They don’t recall and give you credit - they just charge you for it.
In Texas you can’t refinance a rental property - dunno about elsewhere.
Okay, so you went overseas on the first apartment complex? I think in your case with the BK and you walking from it the whole tax thing gets convoluted. It's not like you made a profit from it to take the recapture expense from.
Glad you came out ok in the end. Those were some tough times on a lot of people.
I’m surprised at the hostility in this thread. Maybe it’s a matter of tone, but really there’s no reason for some to defend, and some to seem to condemn, a type of investment. To each her/his own.
Getting ready to leave for 104 days in Asia soon [-]and getting my finances in order, I’ll be collecting over $16k in rents while [/-]sipping on whatever they drink out there I hear Vietnam has some bangin coffee