LHC Real Estate

[shintoooo]

I'm looking at going this direction. I need the tax shelter. Good info to know.

Not sure if it will be Havasu as I haven't decided if I want it to be pure rental where I never see it and it's out of sight out of mind or a snowbird/winter and personal vacation/summer type deal.

Keep in mind, passive losses from rental properties will begin phasing out once your AGI (Adjusted Gross Income) hits $100,000 and will completely phase out once you're over $150K/year. The losses will carryover to future years until your income drops below the $150K limit or to offset capital gains once you sell the property.

 

[shintoooo]

Here's good link for you looking to invest in rental properties. Also, talk to your accountant as everyone's situation varies.

http://www.real-estate-owner.com/rental-property/passive-activity/magi/

 

[COCA COLA COWBOY]

Smart man.
That saved a lot of people from financial disaster for those that took that particular index serious and temporarily rotated back out in '05-'06.
At one point it got down into the low teen's in the So. Cal. surrounding area's right about the time Lehman took a bath. It was the one clear indicator.

We're not there yet...but pick an area and run a title search on the upper end and you have to wonder how long before the market starts to adjust given the debt some are carrying. Just something to watch over.

It varies from area to area. Without going to my notes, San Francisco tanks at a much lower index than most any other area in California as the affordability there is minimal. If I remember right, San Francisco declines when the index hits .07, meaning that only 7% of the population of that area can afford to purchase a home. Inland Empire, if I remember right. historically tanks at .17.

The curve speeds up as it nears the peak. I for one have experienced trying to sell a home on the other side of the peak. I literally dropped the price of a home by ten percent to get it sold as things changed very quickly.

 

[Abc123]

Don't worry. Housing & Stock prices will start coming down when the Fed raises interest rates in November after the election. Should get interesting! Stay tuned.

In my opinion, the Fed won't be raising rates in November or anytime soon. The Fed has to act like they're going to raise rates in order to keep the bubble inflated. Rates won't rise until the market is forced to.


By the way, I'm all for a rate hike. A huge one in fact. In order to to get the world economy back on track, we need one, followed by a crash. People (especially Americans), need to be encouraged to save and pay for things, rather than be encouraged to borrow with low down payment and low interest rate programs. 8 out of 10 times I check out at a store, I'm asked to apply for a credit card. This fiat currency and high consumer debt ponzi-scheme has to end.

 

[Bobby V]

Keep in mind, passive losses from rental properties will begin phasing out once your AGI (Adjusted Gross Income) hits $100,000 and will completely phase out once you're over $150K/year. The losses will carryover to future years until your income drops below the $150K limit or to offset capital gains once you sell the property.

Yea. My accountant told me the same. For now its still paying off for me at the end of the year.

 

[rivrrts429]

Here's good link for you looking to invest in rental properties. Also, talk to your accountant as everyone's situation varies.

http://www.real-estate-owner.com/rental-property/passive-activity/magi/

On the surface, and my interpretation of the link, it doesn't look good for our short term gain and long term is questionable. If I planned to retire in Havasu it could have an upside by having someone else pay my mortgage. But that goes for any location and I'd probably stand to make more in equity locally rather than Havasu.

I want nothing to do with a second property besides the tax shelter. Not looking for a permanent vacation destination but thought maybe combining the two I could see a positive and be able to balance the risk and reward.

I don't know anything about it though so talking to a professional is good advice. My wife and I were just talking about this last night and making a list of items that could help us. Trophy husband didn't make the list lol.

I appreciate the advice, Shintoooo. [emoji106]

 

[LargeOrangeFont]

In my opinion, the Fed won't be raising rates in November or anytime soon. The Fed has to act like they're going to raise rates in order to keep the bubble inflated. Rates won't rise until the market is forced to.


By the way, I'm all for a rate hike. A huge one in fact. In order to to get the world economy back on track, we need one, followed by a crash. People (especially Americans), need to be encouraged to save and pay for things, rather than be encouraged to borrow with low down payment and low interest rate programs. 8 out of 10 times I check out at a store, I'm asked to apply for a credit card. This fiat currency and high consumer debt ponzi-scheme has to end.

I LOLed. That is the antithesis of the modern American socioeconomics and culture.

You are right but people will never learn.

 

[LargeOrangeFont]

I'm looking at going this direction. I need the tax shelter. Good info to know.

Not sure if it will be Havasu as I haven't decided if I want it to be pure rental where I never see it and it's out of sight out of mind or a snowbird/winter and personal vacation/summer type deal.

That is what I did for the tax help. Got the house, started an LLC as well and begun writing off all the costs, trips to the river, mileage, etc. First one is a vacation/partial rental. 2nd is a full time rental. I will be cash flow positive on the whole program (aside from large unexpected repairs) every month now and that is before any write offs. I will need to do the exact math, but I should be around 7%-8% yearly return on the 2 investments, plus the assets will gain value over the long term.

That is using one house as a vacation home for 8 months of the year and not renting it. My return would be more if I rented the vacation home more often. I'd be over 10% for yearly returns for sure.

 

[Wmc]

3 weeks for me to get it to the city, 2-3 weeks at the city, 2-3 weeks for concrete (back logged) and 2 weeks framing
or
6-7months, from "Karl go" - Certificate of Occupancy

if HOA no promises

you have mail. I have a few questions.

 

[78Southwind]

Keep in mind, passive losses from rental properties will begin phasing out once your AGI (Adjusted Gross Income) hits $100,000 and will completely phase out once you're over $150K/year. The losses will carryover to future years until your income drops below the $150K limit or to offset capital gains once you sell the property.

Also, traditional 401(k) contributions effectively reduce both adjusted gross income (AGI) and modified adjusted gross income (MAGI). So, if you are doing some personal tax planning for the year and notice that you are going to phase out or not be able to take as much or all of that years passive loss. You should increase your 401 (k) contributions for that year and this strategy will help lower your (MAGI) allowing you to take more passive losses. This is from a V-Drive and Jet Boat owner and I am not a CPA so don't take this as tax advice.

 

[shintoooo]

Also, traditional 401(k) contributions effectively reduce both adjusted gross income (AGI) and modified adjusted gross income (MAGI). So, if you are doing some personal tax planning for the year and notice that you are going to phase out or not be able to take as much or all of that years passive loss. You should increase your 401 (k) contributions for that year and this strategy will help lower your (MAGI) allowing you to take more passive losses. This is from a V-Drive and Jet Boat owner and I am not a CPA so don't take this as tax advice.

Great advice

 

[copterzach]

$200 plus a square foot? Are there no Mexicans in Az?? And I mean Mexicans with questionable citizenship.

 

[boatpi]

Let me try to clarify a few points some board members have made, and maybe add to some great advice.
Before investing in a Havasu vacation home and rental all in one deal, get the IRS brochure on passive vs. active real estate investments.
Among other topics it details specifics, some of which may include these points;

1. You cannot occupy a rental more than about 10-14 days per year
2. It must be available to rent all of the time unless under repairs.
3. The minimum gross income should be at least $3,000 per year, more is better.
4. You can never deduct any losses against your personal income tax unless the property is "active".

So what is "active". Active means you as an owner and manager the property. To begin with you place the ad, answer the calls, and generally deposit the rent.

Having survived IRS audits and owned income property for 30 years, here is my suggestions and thoughts specifically for a dual property use;

1. Take all rental calls and place all ads.
2. If you can have an agent on site in Havasu show it, and take the rent check but they are a small part of your management, they should collect the rent in you name, and you pay them a set fee since you reside in So Cal. they are basically a caretaker who shows the propery and collects the rental fee for you, they have no active role in managing the property
3. YOU make the call to the house cleaners, and pay ALL invoices yourself!!! Cleaning, taxes, fee to rental agent, call and pay all contractors for repairs. You "activily" manage the property.

IF you do these specific things you should survive an audit AND if you losses in any year fall below the properties income, YOU CAN DEDUCT THE LOSSES AGAINST YOU PERSONAL INCOME!

Keep all receipts and run a spread sheet.

Owning a dual use property can be a good thing, tax shelter, I would not say that as this is small beans, tax write off to avoid income taxes, yes it is that plus the appreciation depending on market conditions.

On 401K and 453B type deductions, if collected by an employer, and maybe self deposited, when you hit 50 years old you can contribute about $21,000 per year!

As others will advise, and we have many pro's here, in my humble opinion, the key to wealth is avoiding taxes legally through real estate investments, 401K style contributions, using every IRS rule allowed to take advantage of investment/income property deductions.

As an example in the past two years my write offs on just two houses have exceeded 100K per year, with a lesser amount over the next 5 years. Yes I spent money exceeding 100K on income property "repairs" and "improvements", yet I increased the value of the property more than the money I spent and paid significantly less in federal and state of CA taxes.