Acquiring Rental Property

LLC isn’t enough to cover you anymore. S-Corp is the minimum due to some case law. This is based on what a realtor recently told me.

 

Don't listen to Dave, open a restaurant.

 

What is this “Capital Gains” you speak of?

 

Profits

 

The difference between what you buy it for and what you sell it for is taxed as a capital gain. You'll also probably want to take depreciation on them which lowers the basis(cost as far as the IRS's concerned).

 

Does that apply to rent payments?

Or is that only when you buy then sell?

 

The tax thing is something else I have to consider.

Because I’ve always worked in countries with a US tax agreement, it isn’t something I’ve worried about.

My money has always been made overseas. I work overseas, and paid out of banks overseas, etc. I am still liable for US taxes, but my company ends up paying 35-40% to other countries on my behalf, which I can claim and totally offsets my US tax liability.

But if I start making money in the US on top of that, it could mess it up.

 

Don't shoot yourself in the foot.

Sell the house. Find reputable investment guy and accountant.

March forward.

 

Ok, but how?

Do I just google one? How do I know I won’t wake up to all my money gone?

Part of not being a people person means, well, I don’t know any people. I’ve lived in this house for 10 years, and wouldn’t know my next door neighbors if they walked up to me.

I damn sure don’t know any financial people.

Until now I’ve just been piling savings into a Money Market account, because the lady at the bank said once you get past a certain amount, it makes more sense. Aside from that, I don’t know what to do.

 

Think of it like this.

You buy 100 shares of a business.

It may be worth a little bit more tomorrow......or in 2009 it was worth a little bit less.

Doesn't matter. You still own a 100 shares of it.

Your house is the same thing. Wasn't worth shit in 2009. Now it's prime time.

 

Income tax on rent.

Capital gains when you sell. Most people also take depreciation on rentals which lowers your cost basis.

Example: Buy a property for $100,000. Take $1000/yr depreciation for five years. Sell it for $125,000. You're paying capital gains on $30,000.

 

https://www.daveramsey.com/smartvestor

 

Thats kinda fucked up. I am trying to learn here, so I don’t want to get dungeony. But we pay income tax, then buy something and pay sales tax, then if we make profit we pay tax on that?

Well shit. What is the %. I might not want to get into it if I’m just going to lose it all to rental management agency and taxes.

 

Ok, that makes sense.

I’ve been thinking the rental house thing makes sense, because I’ve “always got that”.

But I reckon it works the same for investments. If I buy $150k worth of shares, they might go up or down, but I’ve always got them.

Of course, assuming I don’t buy into something that goes bankrupt.

 

Basically, I’m looking to retire super early. Maybe to Redondo Beach in LA (where the wife used to live, I love that area), or maybe to the Philippines or somewhere else.

So I’m looking for ways to make the most money (off other people or things, with a big initial investment from me), without the risk is waking up one morning to it all gone.

 

A word of caution on oceanfront/condo/Florida
When I was working Hurricane Wilma back in 2005, I saw lots of problems with condo associations. The big problem was essentially this: people from the NE move to FL, buy a condo, live simply and never get their condo insurance. They would vote down assessments to build up a disaster reserve for the association. Many oceanfront properties are subject to the windstorm exclusion, and the association has to buy wind specific insurance with a deductible of 20% (or higher) of the total value of the association property. Florida has some huge condo associations, with multiple properties and thousands of units.

Along comes the hurricane and rips the roof of of the building your condo is in. That 20% deductible is $60,000,000. The disaster reserve is $500,000. The damage is $4,000,000. Your unit sits and sits, filling with rain, because there's no money to fix the building's roof. Mold city

I even saw where unit owners banded together to sue the association to conform with the bylaws and replace the roof. But, then the association had to hire a defense attorney, and assess all of the unit owners for those attorneys fees (including the unit owners that were suing). Total cluster

So, while my warning about condos above holds true, you need to ask a lot of questions about insurance/reserves/disaster protocol before buying a condo in FL. Cause you might just end up with a mold factory

 

Welcome to the world the rest of us live in. We all want to make money off our investments.

It's NOT that hard to do reasonably well. Example, I had an IRA from an old job just sitting around not doing much about 5 years ago. At the time Apple was trading at $110/share and Google was just under $1000/share. I called T. Rowe Price and told the lady on the phone what I wanted to do..and they had an account that met my needs. After they moved thing IRA around into the more flexible IRA plan I wanted, I put half in Apple and half in Google. Five years later, the money has nearly quadrupled.

 

I skipped reading this entire thread to get to the important part. DO NOT invest in residential rental property! DO NOT rent your current home to a tenant if you have even the tiniest emotional attachment to it! Every last horror story you have ever heard regarding terrible tenants is just another day for a landlord. I speak from thirty plus years earning a living in the business. Just say no.

 

Where the fuck were you two years ago???

 

Trying to get some deadbeat tenant to pay their rent!