Tax Liability
12-30-2023 | 09:52 AM
#31
Gets Weekends Off
Joined: Mar 2008
Posts: 4,107
Likes: 103
A lot of people talk about how rental property is this unlimited spigot of cash, and the only way to prepare for retirement, so on and so forth. Sometimes they won't shut up about it. But what they don't tell you is there is no real money in it for the retail investor or just your regular Joe.
There is zero money in a simple profit = rent - expenses. Taxes, trades, insurance, management, note...that all burns into it, and that's not even including unexpected expenses like any legal issues or even a tree falling over into something.
You have to understand that the only money in rental property is the cash flow. The high speed guys use that flow to leverage their debt to the hilt to always getting more properties, but there is very little left in the way of cash accumulation. It's a constant, full time job, and a good percentage those properties that you buy need work. It's the "all the work, none of the cash" part of house flipping. You either do it yourself, or you pay the trades to do it. If you are a one off guy, you will be paying full retail for those services. You're going to get creamed by that in the long run.
So there is money, eventually, in the equity you are building, but it's going to be REAL slow if you're starting from a small base, and you can get burned real quick by a slowing hosusing market when you are looking to unload. If interest rates spike, that disrupts your program. Insurance spike will wreck you program. Angry local municipalities will wreck your program. The cash flow part is a trickle, and it's only at the very end, with dozens of properties (at least), that it starts to amount to anything.
The other part that people don't talk about is they use a LOT of "tax harvesting", which is the only place that there is any money saved, and it's not even real money. Everything runs at a loss so you can deduct everything, and save on taxes. Without this, there would be very little in the way of rental property. I'm not going to go into detail on this, but without the tax game, rental property is a giant suckhole of losses.
You can't play the leverage game with one or two properties. You'll lose a pile of cash becaue there is no short term money in rent, and you'll just wind up selling at a discount to some guy playing the leverage game. Tenants are a pain, and management companies (the good ones) cost money, and that's just making the cash situation worse. The only way a one or two property setup makes sense is if you are holding the properties to benefit from a spike in housing prices, and that game carries it's own risk and has holding costs.
Even one or two properties is a hassle, something is always wrong, and there is very little in the way of margin to cover any issues.
If you want to do it to dip your toe in to try it out, that's fine, nothing wrong with that, and maybe it will lead to something. But getting to the end where the money is found is basically a second full time job. Rental isn't the ATM that the people on landlord/investing forums claim it is, not by a long shot, and I suspect a lot of the rental noise is fluffled up by those looking to profit from amateur landlords.
You HAVE to have competent legal advice, and at a minimum an LLC to put some distance between you an an angry tenant, and even that might not help.
My 0.02.
12-30-2023 | 10:48 AM
#32
Line Holder
Joined: Oct 2019
Posts: 282
Likes: 1
Went down that road, so just a heads up, YMMV...DYODD.
A lot of people talk about how rental property is this unlimited spigot of cash, and the only way to prepare for retirement, so on and so forth. Sometimes they won't shut up about it. But what they don't tell you is there is no real money in it for the retail investor or just your regular Joe.
There is zero money in a simple profit = rent - expenses. Taxes, trades, insurance, management, note...that all burns into it, and that's not even including unexpected expenses like any legal issues or even a tree falling over into something.
You have to understand that the only money in rental property is the cash flow. The high speed guys use that flow to leverage their debt to the hilt to always getting more properties, but there is very little left in the way of cash accumulation. It's a constant, full time job, and a good percentage those properties that you buy need work. It's the "all the work, none of the cash" part of house flipping. You either do it yourself, or you pay the trades to do it. If you are a one off guy, you will be paying full retail for those services. You're going to get creamed by that in the long run.
So there is money, eventually, in the equity you are building, but it's going to be REAL slow if you're starting from a small base, and you can get burned real quick by a slowing hosusing market when you are looking to unload. If interest rates spike, that disrupts your program. Insurance spike will wreck you program. Angry local municipalities will wreck your program. The cash flow part is a trickle, and it's only at the very end, with dozens of properties (at least), that it starts to amount to anything.
The other part that people don't talk about is they use a LOT of "tax harvesting", which is the only place that there is any money saved, and it's not even real money. Everything runs at a loss so you can deduct everything, and save on taxes. Without this, there would be very little in the way of rental property. I'm not going to go into detail on this, but without the tax game, rental property is a giant suckhole of losses.
You can't play the leverage game with one or two properties. You'll lose a pile of cash becaue there is no short term money in rent, and you'll just wind up selling at a discount to some guy playing the leverage game. Tenants are a pain, and management companies (the good ones) cost money, and that's just making the cash situation worse. The only way a one or two property setup makes sense is if you are holding the properties to benefit from a spike in housing prices, and that game carries it's own risk and has holding costs.
Even one or two properties is a hassle, something is always wrong, and there is very little in the way of margin to cover any issues.
If you want to do it to dip your toe in to try it out, that's fine, nothing wrong with that, and maybe it will lead to something. But getting to the end where the money is found is basically a second full time job. Rental isn't the ATM that the people on landlord/investing forums claim it is, not by a long shot, and I suspect a lot of the rental noise is fluffled up by those looking to profit from amateur landlords.
You HAVE to have competent legal advice, and at a minimum an LLC to put some distance between you an an angry tenant, and even that might not help.
My 0.02.
A lot of people talk about how rental property is this unlimited spigot of cash, and the only way to prepare for retirement, so on and so forth. Sometimes they won't shut up about it. But what they don't tell you is there is no real money in it for the retail investor or just your regular Joe.
There is zero money in a simple profit = rent - expenses. Taxes, trades, insurance, management, note...that all burns into it, and that's not even including unexpected expenses like any legal issues or even a tree falling over into something.
You have to understand that the only money in rental property is the cash flow. The high speed guys use that flow to leverage their debt to the hilt to always getting more properties, but there is very little left in the way of cash accumulation. It's a constant, full time job, and a good percentage those properties that you buy need work. It's the "all the work, none of the cash" part of house flipping. You either do it yourself, or you pay the trades to do it. If you are a one off guy, you will be paying full retail for those services. You're going to get creamed by that in the long run.
So there is money, eventually, in the equity you are building, but it's going to be REAL slow if you're starting from a small base, and you can get burned real quick by a slowing hosusing market when you are looking to unload. If interest rates spike, that disrupts your program. Insurance spike will wreck you program. Angry local municipalities will wreck your program. The cash flow part is a trickle, and it's only at the very end, with dozens of properties (at least), that it starts to amount to anything.
The other part that people don't talk about is they use a LOT of "tax harvesting", which is the only place that there is any money saved, and it's not even real money. Everything runs at a loss so you can deduct everything, and save on taxes. Without this, there would be very little in the way of rental property. I'm not going to go into detail on this, but without the tax game, rental property is a giant suckhole of losses.
You can't play the leverage game with one or two properties. You'll lose a pile of cash becaue there is no short term money in rent, and you'll just wind up selling at a discount to some guy playing the leverage game. Tenants are a pain, and management companies (the good ones) cost money, and that's just making the cash situation worse. The only way a one or two property setup makes sense is if you are holding the properties to benefit from a spike in housing prices, and that game carries it's own risk and has holding costs.
Even one or two properties is a hassle, something is always wrong, and there is very little in the way of margin to cover any issues.
If you want to do it to dip your toe in to try it out, that's fine, nothing wrong with that, and maybe it will lead to something. But getting to the end where the money is found is basically a second full time job. Rental isn't the ATM that the people on landlord/investing forums claim it is, not by a long shot, and I suspect a lot of the rental noise is fluffled up by those looking to profit from amateur landlords.
You HAVE to have competent legal advice, and at a minimum an LLC to put some distance between you an an angry tenant, and even that might not help.
My 0.02.
No it’s a good 2 cents at that thank you for that post. One of those tax guys mentioned how if you took the money that you would have put into real estate and simply placed it in a mutual fund with descent returns how you would be ahead in the future. So it’s really good to get peoples perspectives. The more we share the more knowledge we all gain !
12-30-2023 | 11:25 AM
#33
— No Relief On Scope —
Joined: Mar 2015
Posts: 4,586
Likes: 345
From: B737 Left Seat
No it’s a good 2 cents at that thank you for that post. One of those tax guys mentioned how if you took the money that you would have put into real estate and simply placed it in a mutual fund with descent returns how you would be ahead in the future. So it’s really good to get peoples perspectives. The more we share the more knowledge we all gain !
When considering a rental property, think about a duplex. One property tax rate for two rental units, and the rent in one side pays the mortgage if you have it bought right.
12-30-2023 | 12:16 PM
#34
Gets Weekends Off
Joined: Apr 2013
Posts: 4,590
Likes: 434
Went down that road, so just a heads up, YMMV...DYODD.
A lot of people talk about how rental property is this unlimited spigot of cash, and the only way to prepare for retirement, so on and so forth. Sometimes they won't shut up about it. But what they don't tell you is there is no real money in it for the retail investor or just your regular Joe.
There is zero money in a simple profit = rent - expenses. Taxes, trades, insurance, management, note...that all burns into it, and that's not even including unexpected expenses like any legal issues or even a tree falling over into something.
You have to understand that the only money in rental property is the cash flow. The high speed guys use that flow to leverage their debt to the hilt to always getting more properties, but there is very little left in the way of cash accumulation. It's a constant, full time job, and a good percentage those properties that you buy need work. It's the "all the work, none of the cash" part of house flipping. You either do it yourself, or you pay the trades to do it. If you are a one off guy, you will be paying full retail for those services. You're going to get creamed by that in the long run.
So there is money, eventually, in the equity you are building, but it's going to be REAL slow if you're starting from a small base, and you can get burned real quick by a slowing hosusing market when you are looking to unload. If interest rates spike, that disrupts your program. Insurance spike will wreck you program. Angry local municipalities will wreck your program. The cash flow part is a trickle, and it's only at the very end, with dozens of properties (at least), that it starts to amount to anything.
The other part that people don't talk about is they use a LOT of "tax harvesting", which is the only place that there is any money saved, and it's not even real money. Everything runs at a loss so you can deduct everything, and save on taxes. Without this, there would be very little in the way of rental property. I'm not going to go into detail on this, but without the tax game, rental property is a giant suckhole of losses.
You can't play the leverage game with one or two properties. You'll lose a pile of cash becaue there is no short term money in rent, and you'll just wind up selling at a discount to some guy playing the leverage game. Tenants are a pain, and management companies (the good ones) cost money, and that's just making the cash situation worse. The only way a one or two property setup makes sense is if you are holding the properties to benefit from a spike in housing prices, and that game carries it's own risk and has holding costs.
Even one or two properties is a hassle, something is always wrong, and there is very little in the way of margin to cover any issues.
If you want to do it to dip your toe in to try it out, that's fine, nothing wrong with that, and maybe it will lead to something. But getting to the end where the money is found is basically a second full time job. Rental isn't the ATM that the people on landlord/investing forums claim it is, not by a long shot, and I suspect a lot of the rental noise is fluffled up by those looking to profit from amateur landlords.
You HAVE to have competent legal advice, and at a minimum an LLC to put some distance between you an an angry tenant, and even that might not help.
My 0.02.
A lot of people talk about how rental property is this unlimited spigot of cash, and the only way to prepare for retirement, so on and so forth. Sometimes they won't shut up about it. But what they don't tell you is there is no real money in it for the retail investor or just your regular Joe.
There is zero money in a simple profit = rent - expenses. Taxes, trades, insurance, management, note...that all burns into it, and that's not even including unexpected expenses like any legal issues or even a tree falling over into something.
You have to understand that the only money in rental property is the cash flow. The high speed guys use that flow to leverage their debt to the hilt to always getting more properties, but there is very little left in the way of cash accumulation. It's a constant, full time job, and a good percentage those properties that you buy need work. It's the "all the work, none of the cash" part of house flipping. You either do it yourself, or you pay the trades to do it. If you are a one off guy, you will be paying full retail for those services. You're going to get creamed by that in the long run.
So there is money, eventually, in the equity you are building, but it's going to be REAL slow if you're starting from a small base, and you can get burned real quick by a slowing hosusing market when you are looking to unload. If interest rates spike, that disrupts your program. Insurance spike will wreck you program. Angry local municipalities will wreck your program. The cash flow part is a trickle, and it's only at the very end, with dozens of properties (at least), that it starts to amount to anything.
The other part that people don't talk about is they use a LOT of "tax harvesting", which is the only place that there is any money saved, and it's not even real money. Everything runs at a loss so you can deduct everything, and save on taxes. Without this, there would be very little in the way of rental property. I'm not going to go into detail on this, but without the tax game, rental property is a giant suckhole of losses.
You can't play the leverage game with one or two properties. You'll lose a pile of cash becaue there is no short term money in rent, and you'll just wind up selling at a discount to some guy playing the leverage game. Tenants are a pain, and management companies (the good ones) cost money, and that's just making the cash situation worse. The only way a one or two property setup makes sense is if you are holding the properties to benefit from a spike in housing prices, and that game carries it's own risk and has holding costs.
Even one or two properties is a hassle, something is always wrong, and there is very little in the way of margin to cover any issues.
If you want to do it to dip your toe in to try it out, that's fine, nothing wrong with that, and maybe it will lead to something. But getting to the end where the money is found is basically a second full time job. Rental isn't the ATM that the people on landlord/investing forums claim it is, not by a long shot, and I suspect a lot of the rental noise is fluffled up by those looking to profit from amateur landlords.
You HAVE to have competent legal advice, and at a minimum an LLC to put some distance between you an an angry tenant, and even that might not help.
My 0.02.
12-30-2023 | 01:55 PM
#35
Gets Weekends Off
Joined: Nov 2012
Posts: 2,030
Likes: 1
The real money in rental property is made by selling the property. Of course, this takes time, luck, timing, and market value.
When considering a rental property, think about a duplex. One property tax rate for two rental units, and the rent in one side pays the mortgage if you have it bought right.
When considering a rental property, think about a duplex. One property tax rate for two rental units, and the rent in one side pays the mortgage if you have it bought right.
You have to know the cycles; buy off the bottom, use rents to cover the expenses and sell at the top. Now, the last three years and probably the next couple years is not the time to buy.
There’s a reason the largest holders of residential rentals (invitation, black stone, etc) are unloading inventory. They’ve plainly stated they’re selling high as rents are dropping and setting that money aside to rebuy rentals in a few years. AAMOF, blackrock has set aside $30b to buy distressed homes as the future recession recovers.
Spend the next year or to educating yourself and saving money.
As Buffet and others say; buy when everyone is selling and sell when everyone is buying.
12-30-2023 | 06:27 PM
#36
Line Holder
Joined: Oct 2019
Posts: 282
Likes: 1
.
You have to know the cycles; buy off the bottom, use rents to cover the expenses and sell at the top. Now, the last three years and probably the next couple years is not the time to buy.
There’s a reason the largest holders of residential rentals (invitation, black stone, etc) are unloading inventory. They’ve plainly stated they’re selling high as rents are dropping and setting that money aside to rebuy rentals in a few years. AAMOF, blackrock has set aside $30b to buy distressed homes as the future recession recovers.
Spend the next year or to educating yourself and saving money.
As Buffet and others say; buy when everyone is selling and sell when everyone is buying.
You have to know the cycles; buy off the bottom, use rents to cover the expenses and sell at the top. Now, the last three years and probably the next couple years is not the time to buy.
There’s a reason the largest holders of residential rentals (invitation, black stone, etc) are unloading inventory. They’ve plainly stated they’re selling high as rents are dropping and setting that money aside to rebuy rentals in a few years. AAMOF, blackrock has set aside $30b to buy distressed homes as the future recession recovers.
Spend the next year or to educating yourself and saving money.
As Buffet and others say; buy when everyone is selling and sell when everyone is buying.
Does that mean they believe we are going to see a big drop in housing eventually ?
12-30-2023 | 06:51 PM
#37
Line Holder
Joined: Mar 2022
Posts: 1,960
Likes: 209
Next year is an election year, money printing will increase. In addition to liquidity, interest rates are going to drop. Personally I'm planning on a housing market uptick for next year. Probably more pronounced the second 1/2 of the year. I'm not at all an expert and I didn't even stay at a holiday inn last night.
12-30-2023 | 07:29 PM
#38
Gets Weekends Off
Joined: Nov 2012
Posts: 2,030
Likes: 1
Next year is an election year, money printing will increase. In addition to liquidity, interest rates are going to drop. Personally I'm planning on a housing market uptick for next year. Probably more pronounced the second 1/2 of the year. I'm not at all an expert and I didn't even stay at a holiday inn last night.
interest rates need to come down, even though they’re historically low. this usually is accompanied by a correction in the stock market and increased unemployment. if it also is associated with deflation unemployment Will generally reach 10%.
there has been a significant increase in houses for sale this fall, inventory never goes up in the fall with exception of 2007.
the average home price is ~$450k which requires an income of $120k, which means only 8% of households can afford the average home.
it cost 50% more per month to own than rent, and rents have fallen to the point they can’t support the average mortgage.
I don’t believe this can continue and imo we’re due for a housing correction, hopefully sooner than later.
research past cycles of the economy, inflation, interest rates, housing and employment and you can see where we are statistically.
the wild card is how far will the government go to artificially affect the inevitable. I believe the more they do the bigger the correction will be when it finally happens.
12-30-2023 | 08:53 PM
#39
At your mom's house
Joined: Jun 2008
Posts: 3,719
Likes: 486
From: cpt 737
The real money in rental property is made by selling the property. Of course, this takes time, luck, timing, and market value.
When considering a rental property, think about a duplex. One property tax rate for two rental units, and the rent in one side pays the mortgage if you have it bought right.
When considering a rental property, think about a duplex. One property tax rate for two rental units, and the rent in one side pays the mortgage if you have it bought right.
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