New answers tagged

2

This is more of a political question, so.... The exemption from capital gain taxes for a primary residence should be understood in context of the subsidization of home ownership that the US practices. The default would be for you to pay taxes on every cent in gains, but the US sees value in more people owning their own homes, and so exempts some gains as a ...


4

I understand where you're coming from. Our house is worth approximately $500k more than we paid for it 9 years ago, and as the market keeps rising we keep accumulating tax liability for when we sell. But we don't want to sell it, yet. Yes, this leaves us with a higher tax bill than people who are willing to move to avoid paying taxes, but not by much. You ...


0

The only solution I came up with is to create a spreadsheet detailing one's total mortgage expenses and comparing them to investing into index funds instead. From my calculations real estate investment is profitable if you have a 30-year mortgage with a low downpayment, presuming that real estate prices grow at at least 1/3 of index funds growth rates.


6

There is no logic to tax rules. Politicians identify a "problem" then write legislation to "fix" it. The limits are whatever could be negotiated and passed. You could also ask why is there a capital gains exemption at all?


2

A decent rule of thumb for this is to take 50% of the rent proceeds and compare that against the obvious costs of ownership of the home P&I, taxes, insurance, and HOA for a person that has experience as a landlord. With the numbers you describe, you will have a mortgage of 4,300 and have 2K in revenue. You don't cite the other obvious costs, but if ...


5

I’d start with the Zoning Board. If your area is zoned single family, the former owners were operating against current ordinances. If multifamily homes are permitted, I’d go to the building department for guidance on how to get the building approved. If I am wrong, they’ll send you to the right department. I suggest them as they are responsible for having ...


2

Mortgage lenders are interested in four main factors when considering a loan: What is the value of the home? The home will be collateral on the loan. Lenders don't want to lend so much that they will be upside down (or even anywhere near upside down, ideally) if you default. Lenders will assess the value of the house to determine this, and compare it to the ...


1

Sorry, this isn't really an answer. I don't have time or space to enter all of my experience in investing in different ways. I have been a landlord, hated it. I got out of it at a small loss. Had one or two good tenants, had 3 bad to horrendous tenants (the last one failed to pay me, ever, and then when finally legally evicted ripped out all of the drywall, ...


4

"Why is this positioned as the only (best) way to build wealth?" Because it's sold and marketed that way - various parties stand to gain a lot by you investing in property - essentially they can take their slice of the pie with minimal exposure while you shoulder most of the risk. But, the success stories are real because the real estate game provides easy ...


6

What is the truth about this? Only partial truth. Investing in real estate is a bad idea for many reasons: Houses depreciate at the same time housing market appreciates. If you buy a house that is 20 years old, 100 years from now it will be 120 years old. Probably old enough to be demolished. Housing market appreciation happens because it's the market ...


3

The thing with property, is like any other portfolio, you ought to diversify. And most people can't afford to diversify when they start in real estate. Real estate investments can be good. I sold an apartment that had been paid for entirely with the bank's money, whose interest and other costs had been paid by the same renters from day 1 (and who decorated!)...


17

No. You have an overly pessimistic view of holding a job, an overly optimistic view of real estate investment, and you don't even mention other alternatives. Sure, you could get laid off from your job. That's stressful, but it's hardly the end of your life. Get another job. If you have marketable skills, this can be quite easy. I was fired once, and I got ...


53

Several other good answers that get into the details, but I think there are a few obvious things that need to be said here: Real estate isn't a risk-free golden ticket - investing in real estate involves a lot of risk. It's easy to fail at it, and then you have nothing to fall back on. Having a career with a skilled job isn't as dismal as you've made it out ...


8

I get the appeal of real estate investing and it is a big part of my retirement strategy. I like owning property because it is a thing I can go and interact with, it feels more permanent and real than the numbers in my retirement/brokerage accounts. The fact is, though, plenty of people retire happily owning no investment properties. Being prepared for ...


38

The sales pitch: A few decades ago, I had a friend that was starting out in real estate investing. He explained his reasoning like this: Buy a starter home. Get a decent house/condo with the best rates because it is an owner occupied purchase. Live there for 5 years. Buy another house, get some renters lined up for the first place. Renters cover the ...


61

What is the truth about this? Pretty much no truth. At 48 years old, I received an offer for a job where I was paid far more than any other employment I had previously. I chose it over two other competing job offers that were offered at a very similar time. While I was laid off from that job, rather abruptly, I had a new job within a short time at age ...


95

I think this might be an instance of "survivor bias" in that you only tend to hear from the people who were successful at it and made a lot of money off of it. Conversely you don't hear as much from the people who lost their shirt trying to flip a house or those who couldn't secure tenants at a good price. If you're interested in the idea of passive real-...


0

I agree with most -- perhaps all -- of the advice already given, but one point has not been raised, by either the OP or any of the answers. What are your career prospects? You have just gone from $25/hour to $50/hour -- a handsome raise. You must have done a lot of things right, from the point of view of your employer. If you concentrate on your current ...


1

My first question is, is this a good idea? Besides Hart's excellent answer, you have to determine whether or not you have the mentality/personality for being a landlord. buying a home with the intention of renting out a section (for example, a two story house, live on the first floor and rent out the second floor, Seal off the second floor from the ...


1

If I were you I would attempt to talk to at least two or three real estate agents and see what they think. One of them should be the neighbor's listing agent. You will have to use discernment in the advice received as their bias will be toward listing now with the agent you are speaking with. While you will likely sell for less, that is not "undercutting ...


3

While a bit broad I think the meat of your question is answerable. Whether renting part of a house or an entire house is lucrative depends primarily on the local market and the quality of tenants available to you. To increase chances of success you want to not be utterly dependent on the rental income, which means healthy cash reserves to pay for various ...


6

From the IRS website: You're eligible for the exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale. The exclusion is tied to the sale of home, and is contingent upon ownership/use of the home being sold. There is no requirement to then purchase ...


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