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Old 11-15-2008, 08:24 PM
 
Location: Forests of Maine
30,685 posts, read 49,462,974 times
Reputation: 19134

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Quote:
Originally Posted by Woof Woof Woof! View Post
Forest,

How do you build equity in apartment buildings?
Each month the rent receipts pay the mortgage and a bit on the side. So money is available to cover water, sewer, garbage, property taxes, and the occasional repairs.

So just as with making any monthly mortgage payment you are building equity.

Before I retired we also would make an extra and separate principle payment, onto the mortgage each month. Which is a tax write-off and builds the equity much faster.



Quote:
... You are paying a lot of money in interest and properties in Maine are not going up in value by much. So how does that work out for you?
I have no mortgage for my Maine property.

When I retired, I cashed out the equity that I had built in other properties, and I used that cash to buy our farm.

I paid in full all $900 per acre for this farm.

Outside of a motorcycle that I bought in 1978, new from a dealership. I do not pay interest on loans using my money.

Whether land values climb or drop, it makes no matter to me. I have no intention of flipping.

My farm I bought for me. The land values here could drop, though it is unlikely. This is my retirement home. So long as I can afford to pay the $50/year property taxes, I am not going to lose it. It has no lien against it.

Our rental property I bought for the investment, it is not for sale. It builds equity, and it provides tax sheltering.

Without it I might have to pay income taxes one day.



Quote:
... If you did not put any money down on the property and housing values have not gone up, you have no equity in the building. In fact, if the values of the properties drop, which is likely, you could end up owing more than the building is worth.
Woofers
You misunderstand how real estate works.

I buy a property for $150k, and I sign leases to four renters.
my family lives in a home that costs nothing from my paycheck, the mortgage is paid, the principle slowly goes down, and I pay no income taxes.

Now 10 years later the principle is down to $50k, I refinance the property back up to $150k. I make $20k in repairs and I walk away with $80k.

I still don't pay income taxes.

And I still have the property.

And it is still building equity.
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Old 11-15-2008, 09:55 PM
 
48,516 posts, read 83,955,483 times
Reputation: 18050
So you refinance again;I hope you see someday the amount in interest you are paying for that refi.You in fact are living on credit just liike so many have that are in the tank now.I presonally can't say taht a property that you lease that cost 150,000 to rent to four rent s is much of a property.If your mortagage is paid I sure hope you are paying nothing on principal on your home.
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Old 11-15-2008, 10:06 PM
 
Location: Forests of Maine
30,685 posts, read 49,462,974 times
Reputation: 19134
Quote:
Originally Posted by texdav View Post
So you refinance again; I hope you see someday the amount in interest you are paying for that refi.You in fact are living on credit just liike so many have that are in the tank now.I presonally can't say taht a property that you lease that cost 150,000 to rent to four rent s is much of a property.If your mortagage is paid I sure hope you are paying nothing on principal on your home.
None of my money, from my paycheck goes to paying any interest.

Everyone who holds a mortgage has credit. In this case it is a business. Such is life.

I am not renting anything, I am not leasing anything.

I own properties. I rent them out to tenants.

As for my home, I have no mortgage on it. I bought it using cash. Cash earned from owning apartment buildings.

I do not pay interest on my vehicles either.
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Old 11-15-2008, 10:14 PM
 
Location: southern california
55,667 posts, read 74,637,859 times
Reputation: 48179
and the answer is in my favorite song by hank williams

Why do you drink? Why do you roll smoke?
Why must you live out them songs that you wrote?
If I'm down in a honky tonk, and some ole slick's tryin' to gimme some
friction
I says "Leave me alone, I'm stayin' all night long 'cause it's a family
tradition"

sing it
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Old 11-16-2008, 12:34 PM
 
29,782 posts, read 34,876,173 times
Reputation: 11705
The trick is to maintain cost when you retire to what is far less then your minimum income floor. We sold our house in very expensive area of the country and moved to a much more reasonable area. We paid cash for a new 2,800 foot home with all the bells and whistles. It is more then we need but what we wanted and we could buy it out right with money to spare. We have a budget that is based on our pension with a margin. Our investments have taken a hit but they were for long term needs and legacy money. We both will be eligible for social security in 1 1/2 years at 62 and wil decided then if we take one or none. The current financial meltdown is changing models we were previously working with so we will see what things are like then. It is very nice having no mortgage and a new house that has passed two home inspections with flying colors. The trick is to be on track to be able to retire at 60 or there after. It was a lot easier prior to the current housing and market meltdown so we were blessed to be ahead of the decline as were many others.
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Old 11-16-2008, 12:45 PM
 
Location: Some place very cold
5,500 posts, read 20,070,496 times
Reputation: 4220
Each month the rent receipts pay the mortgage and a bit on the side. So money is available to cover water, sewer, garbage, property taxes, and the occasional repairs.

Most properties require more than occasional repairs. Even a home that is in good condition costs a lot of money to keep it going. A new roof is $10,000, repaving the driveway, painting, putting in new energy efficient windows, fixing the furnace, and so on and on and on. Most rental properties are not a good source of income unless you bought them years ago and they are paid off.

So just as with making any monthly mortgage payment you are building equity. No, you build equity when the property goes up in value. In your case, you are paying a LOT of money in interest and insurance and PMI because you put no money down on your properties.

Before I retired we also would make an extra and separate principle payment, onto the mortgage each month. Which is a tax write-off and builds the equity much faster.
I was not away that an extra payment counted as a tax write-up. I know that you can depreciate property and that the interest is a tax write off, but a payment on the principal?

Outside of a motorcycle that I bought in 1978, new from a dealership. I do not pay interest on loans using my money. It is your money. The money you get on rent is counted as income, so it is your money.

You misunderstand how real estate works.I buy a property for $150k, and I sign leases to four renters. my family lives in a home that costs nothing from my paycheck, the mortgage is paid, the principle slowly goes down, and I pay no income taxes. Now 10 years later the principle is down to $50k, I refinance the property back up to $150k. I make $20k in repairs and I walk away with $80k. If you sell it, you walk away. But if you refinance, you only walk away with a lot of debt. :-(

I still don't pay income taxes. And I still have the property. And it is still building equity. I'm not so sure. Sounds to me like you could end up with run down property that you pay a lot of interest on to the banks. Paying high interest is never a good thing especially now when asset prices are dropping across the board.

Woofers

Last edited by Woof Woof Woof!; 11-16-2008 at 01:00 PM..
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Old 11-16-2008, 01:32 PM
 
48,516 posts, read 83,955,483 times
Reputation: 18050
If he made a paymnet on the principle there is no tax writeoff the savings is on the total intereswt paid before the loan is paid off. If he pays a payment on interest and principal then only the interest effect the taes. In the end it is poretty much a wash. But then he want not to pay taxes and would porefer to pay the bank more.In this market as far as equity he is in the same boat many owenrs are in that equity requires that the value gains more than he is putting into it.Investment properties are having the same declines as homes that are owned across the country.
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Old 11-16-2008, 02:30 PM
 
Location: Forests of Maine
30,685 posts, read 49,462,974 times
Reputation: 19134
Quote:
Originally Posted by Woof Woof Woof! View Post
... Most properties require more than occasional repairs. Even a home that is in good condition costs a lot of money to keep it going. A new roof is $10,000, repaving the driveway, painting, putting in new energy efficient windows, fixing the furnace, and so on and on and on. Most rental properties are not a good source of income unless you bought them years ago and they are paid off.

$20k is closer to current costs for re-roofing.

I have never repaved, so I don't know about re-paving.

Our current building has asbestos siding, It has not been re-painted since we have owned it [1991] and the paint looks fine. A good paint, on a good siding will last many decades.

We did replace windows in one property, once. I would be very hesitant to do that again. It is very expensive.

Furnaces go out. We have replaced furnaces. More common is to replace water heaters though.

For our home we have been using a water heater plumbed in as a furnace and it is working fine. The next time that I replace a furnace, I will likely replace it with a $200 water heater instead, and just budget to replace it every five years.

Rental properties can be excellent source of income!



Quote:
... So just as with making any monthly mortgage payment you are building equity. No, you build equity when the property goes up in value. In your case, you are paying a LOT of money in interest and insurance and PMI because you put no money down on your properties.

Sadly, You are mistaken.

Only a flipper looks at current resale value, wanting to flip a property for a wind-fall gain.



Quote:
... It is your money. The money you get on rent is counted as income, so it is your money.
Counted?

By whom?

Until I put the money in my pocket, it is the money of the business activity.
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Old 11-18-2008, 07:31 PM
 
Location: Burlington Washington
100 posts, read 258,970 times
Reputation: 41
I know me and my husband (44yrs old) never seem to hold on to any job for very long. Always moving from state to state. We raised 5 kids between the 2 of us. Never been on food stamps or any assist. Just living day to day. Now that I am 40+, I am worried. No savings, no mortgage, no .....for retirement. If I could do it all over again (how many times do we hear that) I would go to college and get a degree. Get a decent pay. I have worked retail all my life whereas the hubby has done welding, plumbing, blue collar work. Time flyes. I try and teach my kid (young adults) about credit and savings. who knows maybe my lack of will be to their benefit!!!!!
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Old 11-24-2008, 01:28 AM
 
13,320 posts, read 25,569,771 times
Reputation: 20505
For what it's worth towards blaming yourself for your choices, you can read many a discussion here where people have gotten college degrees (and attending loans) and have no particular career or useful job with it. I think having skills, either via degree, training, apprenticeship, whatever, is the best way to go, and looking for decent pay that way is more likely to be a success than "getting a degree." We all seem to have those 1960s public service announements in our heads, that sonorous voice saying, "To get a good job, get a good education." There's some relation, but not always.
I mean, you could become a hairdresser, and/or have your own salon, and make "decent pay." I do think women often make lower-income choices, even if they go to college. I think there is still a subconscious "someone will take care of me" feeling, or a sense that the woman's income is an afterthought because there will be some guy paying the bills.
One can only hope, I say. When it comes to men, I just wanna break even.
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