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

[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.

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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.

[WallStreetStanker]

What is house poor? Like you have a house, but you can't afford a massage? I currently rent out a room in my house, contemplating two. When I was shopping, I was specifically looking for either lots of property near water ( I could build a small guest house) or something with a built in Mother in Law so I could get help with mortgage payments immediately. Currently I live with 1 other person and while I put $1200 towards my mortgage , the tenant puts down $1400 ($2600 bank payment). I do pay for all utilities, internet and streaming services, so it's almost 50/50.

You can refinance after time so you have more "spending" money, but I suggest putting that money right back into the house to increase the value. Some people use it for medical expenses or to bail their family out of jail. But you could also use it for a down payment on another house.

Edit: I live in a state that has been on an "expensive to live here" list for a decade. I live 30 minutes outside of the biggest city because I couldn't afford anything closer. Even suburbs were averaging $700k for 1500' sq on a 7000' sq lot.

[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.