<p>^^Like everything you say, no doubt? I can only say “some” because I haven’t read every single thing out there, only “some” posts.</p>
<p>Yes my own noodling on this is indicating a kinder amt</p>
<p>Yes, AMT can affect the calculation, because you don’t get personal exemptions for AMT purposes, and other taxes are removed from your deductions. For me that is more than half of my schedule A deductions.</p>
<p>My AMT tax hit is over $12,000 this year, although a lot of it is because of ISOs I was forced to exercise. My current projection for next year has me out of AMT, which (I think) means I can recapture some of the AMT I paid on my ISOs.</p>
<p>I haven’t seen anything on how schedule A deductions are going to fall through to the 6251.</p>
<p>notrichenough, I don’t know if you’ll check the other thread, but I had a question for you on it about your loans. I know there is cheap money out there, but I sure would like to get a decent loan locked in. The post was: </p>
<p>“That is excellent! Who are you getting to loan you money on your investment properties? I have found only AIM mortgage and PenFed (as a HELOC) are the only ones who will loan on an investor condo. I keep waiting for more companies to start, but haven’t found any others. Until then, we’re paying 4.875% on a HELOC.”</p>
<p>^ I responded in the other thread.</p>
<p>thank you.</p>
<p>I admire the boldness some of you have to invest in real estate now. I’m too timid.</p>
<p>I have a friend that loaded up on NOK below $2.</p>
<p>Another TurboTax update on the Federal return today.</p>
<p>There is no boldness involved, sewhappy, it is just such an obvious opportunity that is impossible to resist. We bought 4 short sale/foreclosure condos in nice developments for 75K,85K,122K,125K, approximately. They all sold for 250-270K within the last 5 years. All rented immediately for between $1200-$1350. Two needed some fairly heavy cosmetic work, two needed very little. Especially with interest rates so low, it is a no brainer. Except rentals are kind of a pain.</p>
<p>
The hard thing is to learn to be a hard-*** and not accept excuses or a sob story.</p>
<p>Plus, a bad tenant can totally destroy your faith in humanity. Especially in a tenant-friendly state like mine.</p>
<p>Not sure I would have bought the two more expensive ones, the GRM is getting out of my comfort zone, especially when you have to throw condo fees into the mix. But it’s great that they are working for you. I am primarily interested in income though, and capital gains are secondary.</p>
<p>Notrichenough, you don’t like those rents compared to the prices of the condos?</p>
<p>What kind of Rents do you want on a 125,000 place?</p>
<p>[Can</a> I Buy Your House, Pretty Please? - WSJ.com](<a href=“Can I Buy Your House, Pretty Please? - WSJ”>Can I Buy Your House, Pretty Please? - WSJ)</p>
<p>Maybe this belongs in the housing market thread but I don’t have it right now.</p>
<p>“The heartfelt missives, often accompanied by personal photos, aim to create an emotional bond that can give their writers an edge—especially in situations where multiple bidders are vying for the same house. And the reappearance of buyer pitches, also known as love letters, offers further evidence that the housing market is rebounding after a five-year slump.”</p>
<p>My mother got a ton of these kinds of letters - people wanted to buy some property that she had in Florida.</p>
<p>Hypothetical:</p>
<p>Rent: 1350</p>
<p>Insurance: $75
Taxes: $250
Condo fee: $250
Utilities: $0 (should be included in condo fee)
Payment: $477 (80% of $125K for 30 years at 4%)</p>
<p>Total expense = $1052</p>
<p>Cash flow = $300/month</p>
<p>That’s not a lot of margin… one repair can blow it for the month. If the unit is empty for a month, it would take 3 to 4 months to make up the loss.</p>
<p>This unit would have a GRM (Gross Rental Multiplier - price divided by one month’s rent) of 93. I like to see 80 or less. My best deal had a GRM of around 40.</p>
<p>Taken collectively, I would want the rent from 3 (and maybe 2) of them to cover all my expenses for all 4 of them, just to give me some vacancy protection.</p>
<p>I made these numbers up of course, so YMMV. This is just one way of evaluating a rental.</p>
<p>You are right, notrichenough, there is not a lot of margin. One repair we had, I think blew it for that condo for the next three years! Your numbers are fairly close guesses, plus or minus. We were doing this for price appreciation, not counting on much of a cash flow. We could probably sell them right now for 140-160K each, I think, as they are 2-3 bedrooms in suburbs of Seattle…but we really think these are appreciating. We did have to think more about the low cash flow on the pricier ones, but they stand a greater chance to appreciate. And the interest we are paying is kind of complicated…0%, 1.49%, 1.9%, 4.75%, 4.875%…at varying amounts. Hoping to pay it all off in 5 years anyways.</p>
<p>But we are pretty crappy business people, didn’t write it all down on spreadsheets or anything. Just saw some crazy deals and had to get them. Haven’t found any others since. But I don’t know how much I like this type of business. I like getting all those checks on the 1st of the month though, with no calls.</p>
<p>Notrichenough, You were able to buy a place for 125,000 that rents for 3,000 a month? </p>
<p>How did you do that? Decent area?</p>
<p>Around here…the ratio you are using is 140 on places around 250,000 to 240 on places around 1 million to a larger ratio on the more expensive homes…</p>
<p>So you can see why I am not buying any rentals. ;)</p>
<p>
It was a 2BR condo I got for $42.5K, it rents for $1100 or so. Bank-owned, one floor of a three-decker. The units originally sold in the $140-160K range, I don’t think they will ever be that high again. It is in a decent area of a non-Boston city in MA. </p>
<p>You don’t have to only buy stuff within a 1/2 hour drive of your house. Expand your horizons and get a property manager to deal with the day-to-day.</p>
<p>
This can work if you are not financing it, especially if you are confident it will increase value. GRM of 240… maybe not so much. :)</p>
<p>GRM isn’t the only metric either… I like it because it is very quick and easy to calculate.</p>
<p>I like what you are doing notrichenough. Looks very good to me.</p>
<p>I could hire a property manager, but to make that work, I would have to buy multiple units.</p>
<p>I could look an hour away. Others are doing this. The ratios are still over 100, I think. I could be wrong. Maybe short sales, and forclosures have slightly better numbers. It is a competitive market.</p>
<p>I was thinking about renting my folks place out. Value is around 350,000. Rent I think would be around 1500 a month. That is a ratio of 233. Than you get into the converting the home to a rental and losing
the cap gains tax allowance and the wear and tear on the place. </p>
<p>If I have to redo the kitchen and baths because of wear and tear, I don’t know if renting this particular place is worth it.
On the positive side, the renter would probably be 75 to 80 years old. :)</p>
<p>Yes. People who are paying higher ratios are betting on price appreciation.</p>
<p>dstark, I don’t need to run the numbers to see that is not a good deal at all. For the hassle, cost of converting to a rental…no way. Unless, of course, you have sentimental value and want to hang onto it, perhaps have you or other family members move into it some day. Or if you think there is a huge upside to come. Otherwise, I’d sell that house when the market gets better. Of course, no reason to leave it empty, may as well rent it till you decide to sell it.</p>
<p>My thinking is the property will increase in value 3 to 4 percent a year going forward. The cost of doing nothing is 1 percent a year. So, the property makes 2 to 3 percent a year.</p>
<p>Cash makes nothing and if inflation picks up than the property has a chance to increase more in value. Kind of like owning TIPS. :)</p>
<p>My wife says no way will we ever move there. My brothers and sister say no way. It is a retirement community. I like it. 
It is in Oakmont for those that know NorCal. </p>
<p>I think we will just see how my folks are doing and when they need the money in about 5 years, we will sell.</p>
<p>That is the plan today. If the place rented for 3,000 a month, I would rent it.</p>
<p>Seems like it would be worth it to rent it, if even for far less. At least you’d be bringing something in. Then again, if you’d have to put a bunch of money into it and spend too much time…maybe not.</p>