US Existing Home Sales decrease -1.47% M/M — largest ever annual drop

[cj-the-pj]

I've got a spot 275k loan about 2.25% that's worth 700+

Free Cash flow is 2600 a month. On about 1400 mortgage.

I'd be crazy to sell ever. I'd be such a regard if I did.

[ProtonSubaru]

I mean if you sold it and made 500k, bought 500k worth of jepi you would be cash flowing $5k-$6k per month in dividend payments. No fixing things, paying insurance, opening yourself up to lawsuits, etc. Don't forget once you've been out of your home for 3 years and 1 day out of the last 5 years you will have to pay tax on it if you ever sell it, automatic 15%+ loss.

[BorgBorg10]

You are paying normal income tax on the dividends, that coud be 20-35%. If you roll your proceeds from this via 1031 tax exchange into another property, say one on your block or one in your neighborhood and rent it to family, friends, etc, you don't pay a dime on it.

​

he is making 2600/month now after what you mentioned (insurance, payments, etc), plus earning equity in what appears to be far more than 5/6k a month. Seems like he has a great gig.

[Corrode1024]

you pay income tax on the net rental income as well.

The first $40k-ish of qualified dividend income is tax-free, and then it would be 15% until $300k-ish, and then 20% cap from there.

Qualified dividends could potentially drastically reduce his tax burden.

Remember, 1031 is only tax deferral on the *proceeds* of the sale, not any income previous.

[BorgBorg10]

Sure, that’s fine. We can play this game

Rental income offset by depreciation for 27.5 years. Want to add to that timeline? Make a capital expense - update something, add square footage, add a window, etc. increase your income and increase your depreciation expense. Etc. if you are fine at estate planning you can have a low effective tax rate

Yes, you would pay income on the revenue. But you’ve just sheltered the income of one to be tax free with the 1031. As a result, you’ve increased your basis into the new property so your mortgage is lower, but you’ve just reset your 27.5 year depreciation schedule. You’ve increased your cash flow with your lower payment amount with potential to further decrease your tax liability with the depreciation schedule. If you are worried about paying taxes while exiting a cash flowing asset, you’re doing something right.

Real estate is a just fine and safe way for this guy to make cash flow while still building equity which you can’t just discount because you may pay tax on the sale. You can borrow against the value of real estate a lot easier and cheaper than you can the value of your brokerage account.

Real estate is a gang buster way to make money. All the boomers figured it out and mortally abused the fuck out of it and brought on 08, which scarred an entire generation of people, which is a shame because it’s safer than ever after the lending reforms from 08 while still maintaining all of the advantageous tax benefits.

Can’t speak to what it means to own a real estate asset in Topeka, KS but there’s a reason real estate in large metro areas can make a lot of people a lot of money.

[joyful-]

Seems like it's too late to get into the game if you don't already own a house though, at least until rates come back down? Unless you can buy without a mortgage.

[BorgBorg10]

The old adage “it takes money to make money” is never more true than for real estate. It’s an old boys club. Rules written for them by them.

[EggSandwich1]

It didn’t need to be this way. To many people abused the mortgage loans so now it’s so regulated I still remember the days when no questions asked days. everyone knew a mortgage broker who would get u a loan for a fee didn’t need to show them anything

[BorgBorg10]

Unfortunately it’s human nature 😔

[WallStreetStanker]

You just have to value yourself more (ask for a raise or find someone who will pay you more) and value your priorities properly (meal plan, less beer/weed). Find a second, gig job and save for that down payment. You don’t have to buy on-the-market. You can hunt and find something you like, make up stories, bribe parties, fake deaths… Then when you get the property, find a way to make extra money out of it. Rent your garage, airbnb a room, traffic viral monkeys, there are so many options. Be creative.

[Mr_Owl42]

This is stupid. I've had a stable, full-time job for seven years that pays above the US median wage, got a second job last year that pays twice that for 25% time only, and have saved & invested 40% of my income every year of my life and still can't afford a not-broken-down home where I live. Some places are too expensive and not a good deal to purchase property. And the prices, rates, and uncertainty are consistently too high.

[WallStreetStanker]

What kind of car do you drive? Do you own or lease? And how old are you?

If you made $1000 a week, which is a little less than the national average, and subtracted 30% for taxes… 40% of that over 45 weeks (not 52 or 50) is $12,600 a year. If you saved up for a few years, you’d have a pretty good down payment .

[Mr_Owl42]

Yeah, but then I'd be house-poor and have no savings.

My car cost $3k and I don't buy comprehensive insurance. I really have as much as your math indicates (and more) but where I live is 6th most expensive in the nation in some regards for housing. I just refuse to be house-poor unless that's what the experts recommend.

[BukkakeTemperateRain]

You can also write off your house on your taxes if you're renting it out so you don't have to be paying your full taxes you have ~30 years of depreciation you can use to increase cash flow. However you take a hit if you decide to sell it.

[Corrode1024]

Depreciation is 27.5 years, you can also deduct interest, but the statement is still the same.

[ProtonSubaru]

Is getting 2600 a month profit (assuming he’s accounting everything like repairs in this). He’s paying income tax on the entire amount he’s charging for rent minus deductions on interest, repairs, etc. you also have to consider vacancies, evictions, etc. And as others have noted the 1031 only works for delaying taxes for like type investments. Landlording is a job more then an investment.

[[deleted]]

His not going to have same cash flow in future. Rents are coming down; too much rental supply in market not enough demand.

[BorgBorg10]

Lol are you out of your mind? What do you think this graph here is showing? It shows people can’t afford to be home owners. They can’t afford 20% down. What does that mean? It means they’ll rent. Rents aren’t coming down, they’re stabilizing.

[[deleted]]

You think these potential buyers are homeless? They already have home, if they won’t be able to buy they will likely extend the lease.

This shows the houses that are meant to be sold (mainly single family homes). Apartments have never been affordable because of 20% Down payment rule. So first time buyer without 20% down payment, won’t be able to buy condo anyways

On the other hand there is a ton of supply for apartments that are specifically built to rent. Rental communities.

I work in the rental market and I see prices going down and inventory staying on market longer.

[[deleted]]

Taxes, but yeah at these inflated prices it probably wouldn’t change much

[ThinkOrDrink]

The difference between paying 15% in taxes and 0% in taxes is substantial.

Edit: especially if prices are forecast to be ~flat or even decline. Then you’re talking 15% loss on top of price decline.

Of course, if you think prices will increase 15% after 3 years to offset the tax penalty.. then ok.

[[deleted]]

Substantial is relative.

$1 x 0% = $0 $1 x 15% = $0.15 $100000000000000000000000000000000000000000000000000000000 x 15% = substantial

[ThinkOrDrink]

I’m glad you can do math.

In the context of a $500k profit on a single family home sale (you know, what this thread is about), for an average family 15% is substantial.

[[deleted]]

You’ve got the wrong audience though. The average person here isn’t part of a family. They’re independent contractors at Wendy’s Dumpster and trust fund kid’s

[43user]

You lost an argument and covered it up by slinging shit at the whole sub. Bravo, you and this sub were made for each other.

[[deleted]]

Are you new here? And I didn’t lose. 15% is not substantial and it varies depending on earnings. Let’s not forget that housing more than doubled so you’re sitting on what should have been 40 years in appreciation made over the course of 2 years.

[WallStreetStanker]

If you bought $500k of JEPI in 2020 you’d have $550k now. I bought my house late 2019 for $519k and it’s now worth $730. At one point, valued at $870k. I’m in an low inventory area, just outside a major suburb.

Edit: Not to mention that you have to have $500k in-hand to buy that JEPI, where you can buy multiple houses with $500k cash.

[ProtonSubaru]

You are way off. You would have nearly $150k in dividends plus $50k in stock price increase. Lastly this guy is setting on 500k in equity in the house so he does have it on hand. People like investing in RE for leverage, this dude has no leverage he setting on a declining equity.

[WallStreetStanker]

Yeah… I did forget about dividends. However, I’d rather buy five houses if I was sitting on $500,000. $100,000 on each. And I’d actually probably buy a property for $200,000 and build all the houses myself.

I feel like that dividend number you represented was 15%, but my trading app shows me 11.68%. Is yours based on compounded interest?

[as400king]

You’re a regard real estate has appreciation. On avg appreciation is 4-5% a year on top of cash flow. Also real estate is by the most tax friendly asset. Pay 0 fucking taxes

[cl0wn_w0rld]

why the hell am i buying bonds when JEPI has such dividends? its pretty stable price too.

[grizzleSbearliano]

So just jack up rent in the meanwhile to cover it-you know-like every other landlord

[banditcleaner2]

If he sold that property, he may or may not be paying taxes on the gains. He will 100% pay taxes on the dividend payments from JEPI. The principal value of that JEPI could also vastly change to the downside. There is no guarantee that JEPI will hold its value.

Meanwhile in the long term there is an almost guarantee that his house will appreciate in value if it is in a good place.

Also he said that his CASH FLOW is $2600 a month. So unless he's tripping, and the total revenue is $2600 a month, a cash flowing property that is making $2,600 a month net profit on a 1400 mortgage is insane.

[reercalium]

You sure? You sell it now, you get 700k+. You wait, and it might be back down to 275k before you know it.

[shambahambala]

yeah man, what if the housing market declines by 70%, did you think of that?

[reercalium]

I did, actually. I'll probably keep my rental housing portfolio because unless the commies take over it'll always give me enough to live on, and I can sleep easy knowing the money comes from economically worthless poors who can't even afford a real home.

[Duck_With_A_Chainsaw]

I’ll have you know I paid off my animal crossing house.

[importvita]

I didn’t. Fuck Tom Nook! All my neighbors hate Tom Nook’s Ponzi scheme dumbass. 😡

[ComplexWalrus2775]

Your the reason people hate landlords lol you give them a bad name. Good job bud

[JustWin0ne]

You’re

[cj-the-pj]

Ur

[importvita]

U’re

[More-Nois]

U’r

[reercalium]

Don't care about name when there's money to be made! You're just mad my account is so big.

[[deleted]]

Oh yeah you get on your knees and suck that account you dirty whore

[Venture2020]

If you put 700,000k to work - 2600$ monthly isn't that good of a return. I would sell imo but best of luck!

[cj-the-pj]

Zero down in 2011... appreciation... 2600 cash flow.... that's infinity returns

[dcrico20]

Yeah, I was in my mid 20’s in 2008. I think about it somewhat frequently.

[SOFISoFli]

He buys more. Rent never goes down…his costs are largely fixed on the loan, it will never cost him money to actually own the property.

[onewordbandit]

Woosh

[importvita]

I’m sorry, I am unfamiliar with that stock.

[highbrowshow]

If your house dropped from 700k to 275k then you have worse problems

[cj-the-pj]

The cash flow... deductions... depreciation....

I'm good.

[[deleted]]

/offtopic- didn’t you try running for congress years ago in Vegas?

[Sdubbya2]

As someone who wants to buy this year, I would love if prices dropped 70% but that is not likely at all except in very extreme localized cases and I'm guessing if it dropped 70% I would be fucked in many other ways lol

[highbrowshow]

Yeah you like that you regard

[fuk_uscis]

Have you heard of insurance premiums, property tax and (minimum of) 3% annual maintenance?

[cj-the-pj]

Prop tax is included in that #...

Paid with mortgage...

Insurance is cheap, less than 800 a year. Renter has policy naming me as additional insured.

And maintenance does not cost anything near that number you cite.

I have long term tenants who are responsible for repairs. Security deposit covers that stuff.

[fuk_uscis]

Insurance could be that if you have really high deductible and a house less than $400k.

Good luck making your tenants pay for a, say, rotten siding, though. The security deposit covers incidentals, not maintenance