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Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
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Quote:
Originally Posted by marmac
In most areas, when you move out of a house and rent it out ,you lose the homestead exemption and thus pay much higher taxes as a landlord vs taxes as a homeowner living there.
In CA a homeowner living in his principal residence is able to claim a $7000 exemption on the value of the property. If the property is valued at $100K, The homeowner pays taxes on a valuation of $93K.
With an average of about 1.5% property tax rate, that's about $100 less per year in this example.
You tring to say buying a house with a mortgage payment of $1600-$1700 and then renting it out for $1250 a month is profitable?
Surprised more people aren't doing that( sarc)
Well it depends on it that $1600/1700 includes principal payments. If it's principal, than you are breaking just about breaking even. [If our mortgage (excluding principal) goes to $1200-1300]. And if you can deduct HOA fees (which can range from 100-$500 a month), than you are actually making money on the rental property.
Well it depends on it that $1600/1700 includes principal payments. If it's principal, than you are breaking just about breaking even. [If our mortgage (excluding principal) goes to $1200-1300]. And if you can deduct HOA fees (which can range from 100-$500 a month), than you are actually making money on the rental property.
Surprised more people aren't doing that ( buying a house with mortgage payments of $1600/1700 and renting it out for $1250)
You should get into that business.
I doubt you would have many competing with you to do the same.
Surprised more people aren't doing that ( buying a house with mortgage payments of $1600/1700 and renting it out for $1250)
You should get into that business.
I doubt you would have many competing with you to do the same.
I get what you are saying.
In reality, they are not losing money because you cannot deduct principal payments from a rental property, although I know many people who cheat the system.
It's not a long term solution but most people can ride it out for a few years. It's the psychology of thinking about losing money when there isn't any real money being lost because of principal payments being made into the property.
That's the way it is here and that's the way it is in the majority of places I have researched to re-locate to in the south.
In Texas I think you are allowed a homestead exemption on one property only. If you own multiple properties you can only claim the exemption for your principal residence.
Surprised more people aren't doing that ( buying a house with mortgage payments of $1600/1700 and renting it out for $1250)
You should get into that business.
I doubt you would have many competing with you to do the same.
So if you have a mortage payment for 1200 and you collect 1200 in rent you think you are just breaking even? The paid off house doesn't isn't worth anything at the end of 30 years? Say you are in year 10 of your loan and rent your house for 1250. The mortage is 1602 for a house of $215,000(the number includes mortage taxes(2%) and homeowners insurance($90)). You rent for years 11 and 12. You will collect 30000 in rent and pay 38448 in mortage payments. At the begining of year 11 if you sold you woudl have sold for 215 and owed 203355. If you sold at the end of year 12 you would sell for 215 and owe 190894. Case A you make about 11.6k and case b you make over 24k and after subtracting the 8.5k for the shortfall you had to cover your at 16k profit.
Case B is clearly more beneficial, even though you are renting at negative cashflow. Thats the point. If your at the begining of the loan you will have to get more rent(though not the full amount) to come out even.
You have a good starting point with your approach, but you'll lose money on every investment property you own if you base your decision using this calculation. Anyone that owns investment property knows that there are several other expenses that need factored into your calculations. For example, hoa dues, accountant fees, repairs, maintenance, cleaning after tenant moves out, advertising, vacancies, etc....
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