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Depending on the real estate, if it’s something you don’t mind living in before you sell you could do that then use the homeowners exemption.
you don't get the whole exemption . it is prorated over the total years it was a rental . you also have to pay the depreciation back regardless when sold as it falls outside the exemption when converting . so they did away with simply move in and you get the whole exemption after 2 years ... since 2008 they count all the years of ownership then prorate what you get to take .
You can NOT avoid depreciation recapture taxes by making the property your principal residence. You will still owe the taxes when you sell the property.
There are only two ways to avoid depreciation recapture taxes. Both of them are bad for you, but one of them might please your heirs.
If you sell at or below the depreciated value, then there is no depreciation to recapture.
If the house becomes part of your estate after death, the cost basis in the house is reset.
You can delay the depreciation recapture taxes on a sale by reinvesting the proceeds into another property, in a slightly-complicated tax move called a 1031 Exchange,
since we don't want to be landlords in retirement that was not an option .
Last edited by mathjak107; 02-02-2019 at 03:45 AM..
No, if held for more than one year, the gain is a long term capital gain and taxed at long term capital gain rates, and is not treated as ordinary income.
wrong ... depreciation is recaptured at a different rate . you really need to understand what is being discussed first ,before correcting others ..
"not all gains benefit from the long-term capital gain tax rates. Depreciation recapture is the portion of the gain attributable to the depreciation deductions previously allowed during the period the taxpayer owned the property. The depreciation recapture rate on this portion of the gain is 25%. The reasoning behind the depreciation recapture rules is since the taxpayer received the benefit of a depreciation deduction that offset ordinary income tax rates"
i thought we would be landlords forever . but once we started our decent in to retirement we decided we no longer want to deal with tenants nor hold assets we can't rebalance or liquidate with the push of a button .
Location: Was Midvalley Oregon; Now Eastside Seattle area
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We made an offer to DS: We'll keep the LTCi policy, IF we have the ongoing income. We won't ask you for money when we run out from taking long cruises and buying new cars. All you have to do is locate and manage rentals. We will buy the properties, take the depreciation, and take the income. and IF you should ever get married and have children (in our lifetimes), you will get the properties without encumbrances.
Location: Formerly Pleasanton Ca, now in Marietta Ga
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Quote:
Originally Posted by mathjak107
i thought we would be landlords forever . but once we started our decent in to retirement we decided we no longer want to deal with tenants nor hold assets we can't rebalance or liquidate with the push of a button .
The difference was you had a lifetime of investing in the market. I only had a 150k in the market which in the years I held it made no money. I was already too old to make up for the lost investing years and my job had all but disappeared making an accelerated investing run impossible. Hard to invest in the market when you,don’t have an income. I was able to reach a retirement income, nearly double my net worth, and not work in less than five years with real estate. Even with an income I could not have invested enough in the market to catch up.
So I do spend an hour a month on it, a lot is just checking my bank account to see money deposited and doing some light book keeping for my cpa for the end of the year. I know you feel it’s not passive, but one hour a month to be able to stop working early, heck even be remotely retired period is easy enough for me.
12 hours a year for over 100k a year in cash flow, worth it to me.
I already ran the number on this site and my appreciation on thenvreal estate beat the market.
I never did so much as swing a hammer to fix up the properties, all hired out.
So you can have the bragging rights of your passive income although personally imho if you have to keep an eye on the market and readjust as needed, it’s not passive. Your still involved.
Just my 2 cents.
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,351 posts, read 8,574,670 times
Reputation: 16698
Quote:
Originally Posted by leastprime
We made an offer to DS: We'll keep the LTCi policy, IF we have the ongoing income. We won't ask you for money when we run out from taking long cruises and buying new cars. All you have to do is locate and manage rentals. We will buy the properties, take the depreciation, and take the income. and IF you should ever get married and have children (in our lifetimes), you will get the properties without encumbrances.
The difference was you had a lifetime of investing in the market. I only had a 150k in the market which in the years I held it made no money. I was already too old to make up for the lost investing years and my job had all but disappeared making an accelerated investing run impossible. Hard to invest in the market when you,don’t have an income. I was able to reach a retirement income, nearly double my net worth, and not work in less than five years with real estate. Even with an income I could not have invested enough in the market to catch up.
So I do spend an hour a month on it, a lot is just checking my bank account to see money deposited and doing some light book keeping for my cpa for the end of the year. I know you feel it’s not passive, but one hour a month to be able to stop working early, heck even be remotely retired period is easy enough for me.
12 hours a year for over 100k a year in cash flow, worth it to me.
I already ran the number on this site and my appreciation on thenvreal estate beat the market.
I never did so much as swing a hammer to fix up the properties, all hired out.
So you can have the bragging rights of your passive income although personally imho if you have to keep an eye on the market and readjust as needed, it’s not passive. Your still involved.
Just my 2 cents.
there is no such thing as anything worth doing that is truly passive .. even indexing requires rebalancing , it goes with the territory ...
with investments , time is always your friend . this is why i don't like to see people channeling to much in extra payments in to their homes to pay them off faster , before they will p/u the investing .
they put a lot of pressure on their time frame being a good one by delaying kicking in to high gear until years later . the greater the time you give yourself the greater the pressure is off to have better then average returns to make up for time .
we owned a load of real estate through the years but not something we want to have being retired . especially because here it can take months to get a tenant out and expenses run high as well as so do legal fees . eventually the best tenants can go bad from - divorce-illness- job loss .. no matter how you vet them .. .
I have a friend here in the Bay Area who bought 4 properties for a total of 600k, cash, in 2010-2011. Cash flow was over 100k. He decided to unload them all over the last year. Over 2M total. I think he sees another downturn in real estate prices. Knowing him, he will stick the money in CDs and rebuy more properties if prices crater again.
I don’t have what it takes to be a landlord, but for those who do, real estate prices do ebb and flow, and they do it so slowly, that a killing can be made as long as you have cash on hand when prices are low. You don’t risk missing the handful of big movement days like you do in the stock market. And you can get out “in time” if the **** hits the fan.
Lots of positives to it if you can deal with physically owning properties. I can’t. I can’t even stand owning the roof over my head.
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