Retirees: do you prefer rental property or investing in the stock market as an accumulation strategy? (pension, separate)
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You're assuming that the manager will actually do their job and that can't be assumed in the real world.
Property managers commonly take advantage of smaller landlords. They can mismanage a property right out of business and when all is said and done and you're left with an expensive mess they'll just say "Being a landlord is a risk and we can't guarantee anything. Sorry."
Unless you have a huge book of business like 20 units or more, it's not feasible to hire a manager IMO.
OK maybe you can answer some questions for me. If someone put $100,000 into the stock market and it gains $50,000, if they pull that $50,000 out in one year or less is it considered to be short term capital gains and taxed as such? If they wait for over one year is it then tax at long-term capital gains, a lower rate?
In your case you said you kept your income below the $94,000 threshold for the 15% tax rate for that year. So if someone had $120,000 salaried W-2 income job, would they have paid the long-term capital gains tax on that $23,000? Is that $94,000 threshold for a single or married person? Also the long-term capital gains tax you avoided on the $23,000, if you had sold it in less than a year does the same rule apply?
If someone had an income of $120,000 what ways are they able to try to reduce that to the $94,000 threshold?
if you are talking about your rental income you would need deductions to bring you to that 94k AGI. Do some repair and upgrades to the rental properties. Adopt some kids. Make charitable contributions. These go for W-2 income with the exception of the upgrades and repairs to rental property.
in reply to your response to me. That is fine and I never said it was wrong. I only said it isn't for everyone. I think a balanced approach is a better bet. I know people who have focused on only one of the investment methods. They do okay but it isn't for everyone.
I think people who use rental property as investment and income have their own style. It is something not everyone wants or likes.
The pro RE posters all assume that everyone can get the rents and returns and tax advantages that they are. Just like the stock market, that is never always the case. I know many that have multiple properties in my area, and most are trying to sell them...they are not worth the trouble for the income. My earned income eliminates any tax advantage...even in retirement. Purchasing around here is relatively inexpensive, so home rental is only fair. And without trying to offend anyone, there is something distasteful about being a landlord...
Not exactly true. I have nearly 20 years worth of a ROTH Ira invested in the stock market with very tasty gains. When I withdraw them, theres will be no taxes due.
You're assuming that the manager will actually do their job and that can't be assumed in the real world.
Property managers commonly take advantage of smaller landlords. They can mismanage a property right out of business and when all is said and done and you're left with an expensive mess they'll just say "Being a landlord is a risk and we can't guarantee anything. Sorry."
Unless you have a huge book of business like 20 units or more, it's not feasible to hire a manager IMO.
If you hire a manager, then you are closely approaching the point where it is no longer a non-passive activity. You might lose the primary benefits of owning rental real estate.
The pro RE posters all assume that everyone can get the rents and returns and tax advantages that they are. Just like the stock market, that is never always the case. I know many that have multiple properties in my area, and most are trying to sell them...they are not worth the trouble for the income. My earned income eliminates any tax advantage...even in retirement. Purchasing around here is relatively inexpensive, so home rental is only fair. And without trying to offend anyone, there is something distasteful about being a landlord...
Most people I know who either do not have their properties paid for, or have long term mortgages are in that category. They are not making enough money to bother with and do not see how they will ever have enough to bother with. So they sell.
It is commonly considered "wise" to "take your money out" of the real estate. So every time the owner finds himself in an equity position he spoils it. Commonly, the money is simply spent.
People who have their properties paid for take a much different view. I have seen a couple of other posters in this thread who fall in that category, and we are almost always pleased with our returns.
To your point: It was some time before I learned how to find good renters who will pay. In the beginning, it must be accepted as a fact that you will not get 12 months rent every year.
I have one rental property, and also have a property management company to handle it. The 10% I pay monthly is worth it to me. I guess it's different for everyone.
Location: Formerly Pleasanton Ca, now in Marietta Ga
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Quote:
Originally Posted by Submariner
And your ROTH IRA owned rental provides tax-sheltering over your salary income?
How do you put a ROTH IRA onto a Schedule E ?
No schedule e.
Not sure I understand your question. The Roth IRA acts like a Roth IRA. No deduction when you contribute. Also no depreciation on the properties held by it. It's no different than a Roth IRA you hold that owns stocks and mutual funds except that you have real estate rentals instead. All revenues from properties go into the Roth. Any expenses incurred by properties must be paid from the Roth . No commingling of funds.
After this year I will have no salary income, it will all be unearned income from my rentals (those I hold outside of my Roth). I mostly retired from working, but had a few high paying clients that had me work for a few days.
Mostly just lived off the rental income.
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