Investing In 1st Property - Question Re: Negative Cash Flow
Hi,
My husband and I are looking into investing in our first investment property. But we live in So. Cal. and everyone recommends investing in your own backyard and finding a positive cash flow property in our neck of the woods is tough. Is it completely ridiculous to have your first investment property with negative cash flow and deduct the loss against my husband's regular W2 income (thus making up the loss via the tax savings)? Can we deduct the loss if we hold the property in an LLC? Thanks in advance for any and all advice.
Liberty 
Hey,
You do NOT buy a rental unless it has positive cash flow. It will end up eating you alive.
It is not easy to find good rental properties. You have to find motivated sellers and work a good deal.
Depending on the investement structure you use, you can pass the loss to your personal tax return, BUT this does NOT offset the total loss only an amount equal to your tax bracket. IN other words you will get back $0.30 (or whatever) for every dollar you loss. I do not believe you can pass a LLC loss directly to your own taxes, but I do not use LLC.
Liberty,
I have to agree with Bruce. You don't want to become desperate and buy properties with negative cash flow unless you are already rich and want to slowly grow poor. Be patient, the deals are out there, even if they are in the rental area.
Robert
[addsig]
So did you hear the one about the farmer who won the lottery? The newspaper came out to interview him and among they questions they asked was "What are you going to do with all that money?"
"Well, I guess I'll just keep on farming until I use it all up."
Mark,
Great example! I'm going to remember that one.
Robert
Quote:
On 2004-08-22 22:05, 4Liberty wrote:
Hi,
My husband and I are looking into investing in our first investment property. But we live in So. Cal. and everyone recommends investing in your own backyard and finding a positive cash flow property in our neck of the woods is tough. Is it completely ridiculous to have your first investment property with negative cash flow and deduct the loss against my husband's regular W2 income (thus making up the loss via the tax savings)? Can we deduct the loss if we hold the property in an LLC? Thanks in advance for any and all advice.
Liberty
4liberty, Run the Preforeclosure in that area.
There was a nice multiple unit on Francisquito just about 3 blocks South of the Freeway. Went into foreclosure. Two owners. got in a fight about one of their wives. Property went into foreclosure. An investor got the Quit claim deed from one of the owners paid I think $5,000 for the half interest. Then with that in hand went to the other owner and after a day of talk picked up the other half interest with a Quite Claim Deed. I think he gave a note all due in 24 months for about $10,000. All in all gathered about $95,000 in true equity. So he is holding subject to the existing lst TD which he has brought out of foreclosure. I think it is a little 4 unit. I know he is moving a sister into one of the units. Sweet deal.
Your area of West Covina is a perfect area for these times and this kind of market. You have working class, mixed ethnticiy, Country Clubers etc. Start running preforeclosures. Go gentle in the wind. When you see a fight between owners, merely solve it one by one. Each one wants to do in the other so you help. You buy one side of the quarrel with the promise of burying the other. You then pick up the other side with a like promise. Now you have the property. You can do this with very limited capital and it is close to your home easy management.
So go do it. Enjoy Lucius