10-31-2019, 06:18 AM
(07-02-2019, 08:14 PM)rayray Wrote:(07-02-2019, 01:23 PM)ChadR Wrote: You turn your current house into a rental, you start depreciating it at the price you paid for it. eg You bought it for $150k, that is what your depreciable basis is. If it is worth $250k, you don't get to depreciate that extra $100k. When you sell it years down the road, you pay taxes on the $100k of gain. Where if you sell it now, you get the $100k gain tax free and the new rental you buy for $250k you get to depreciate the rental at the $250k basis. And then when you sell it, you pay capital gains on the gain from $250k and not $150K (this is ignoring depreciation recapture). There by saving the taxes on the $100k capital gain.
The downside to the 1031 exchange is that you have to keep in the rental game. If you ever get sick of being a landlord or want to use the money for something else, you then have to pay the taxes. But yes, it is best to never sell real estate.
Another thing he did was non of his rentals came with appliances, nothing, he would tell me he's in the rental property business not the appliance and repair business. He didn't want to be getting 2am calls that some dishwasher, dryer, washing machine or fridge wasn't working.
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Regarding some of the horror stories.
YOU GOTTA HAVE A PLAN
I have had more than my share of totally ruined rental units. I have all of them insured by the same company and same agent. The insurance pays for the renovations and covers the missing rent until the unit unit is ready to re-rent. You must present the case as vandalism. Get a police report when you gain access to the unit and file your insurance claim.
Regarding appliances and late night calls. I don't answer my phone outside of regular business hours. The tenants are instructed that if they have a fire or other life threatening issue to call 9-1-1. Other "catastrophes like a burst pipe or no heat situation" they call one of my guys. If it turns out to not be an emergency situation when he gets there. THEY PAY THE BILL. All spelled out in their rental agreement. (No more leases-they are way too tenant favorable)
Just met a younger guy 40ish who has 115 SF rentals. Oh if I was 20 years younger