Out Of State House Sale

Comments(12)

• 
  edmeyer23rd May, 2005

  The classic plan that was taught by Jack Miller and John Schaub in their seminar "Fortune Building Fundamentals" was to buy about 5 houses per year. At the end of 5 years, you would refinance the houses you bought in year one. You would live on this during year six. At the end of year six you refi the properties bought during year two, etc.
  
  This was taught before the 1986 Tax Reform. The point was that borrowing money was not a taxable event. You never sold the properties, you would just harvest cash every 5 years. There may be something in the Tax Reform that might preclude doing this. There may be some requirement to re-invest the borrowed money rather than spend it. It should be easy to check with a tax person or maybe online. But, this is an interesting idea.[ Edited by edmeyer on Date 05/23/2005 ]

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  NewKidinTown229th May, 2005

  ed,
  
  The tax treatment on the mortgage interest requires that the cash out loan proceeds be used for an investment purpose to make the mortgage interest deductible.
  
  Using the loan proceeds for personal use makes the mortgage interest charged on that amount ineligible for a mortgage interest deduction.

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  fmmp29th May, 2005

  Uncle Sam and his rules?

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  cjmazur29th May, 2005

  why nit use a HELOC/loan to cash out equity?

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  NewKidinTown231st May, 2005

  Quote:My current investment plan is to buy and lease/option homes and 1031 exchange them after 2 years. I should be up to about 20 houses in 6-8 years that have been obtained using 1031 tax exchanges.kcorsini,
  
  In my humble opinion, your investment strategy is a property flipping business. As an active income business, your houses are the merchandise your business sells and thus all your sale profits are ordinary income to your business.
  
  i see the lease option as a technique to facilitate the sale and therefore the property under lease option is still merchandise to your business.
  
  Since capital gains tax treatment does not apply, there are no capital gains to be deferred. Your business strategy disqualifies use of a 1031 exchange in your business model.

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  bobhope1st June, 2005

  thanks....

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  Randie20th May, 2005

  Venator64, how did you get 16 sign ups within 4 months. I am a newbie myself here in Arizona, and I would like to know how you did it. How did you find these 16 sign ups. I would like to know you tricks.

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  d_random20th May, 2005

  prodigy_2k
  
  Would you say that Turbo Tax gets all the possible deductions for real estate investment property? I am always worried during tax time that I am somehow missing some deductions using software than a CPA. What do you think?

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  NewKidinTown220th May, 2005

  Quote:Would you say that Turbo Tax gets all the possible deductions for real estate investment property? I am always worried during tax time that I am somehow missing some deductions using software than a CPA. What do you think?d_random,
  
  TurboTax Premier is probably the best for the rental property owner who is afraid of missing something. If you check all the deductions suggested in the book you cited, then a lesser version of TurboTax with a less comprehensive rental property income and expense interview will serve you just as well.

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  d_random23rd May, 2005

  NewKidinTown2
  
  Thanks for your reply! Assuaged some of my tax related fears.

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  tcikevin1st June, 2005

  I had the same issue when it came to quickbooks and taxes. I opted for quickbooks, and then ran everything through turbo tax to see what the impact of my rentals would be. In the end when I sat down with my accountant he actually said it might be better for me to just do them, since I had already ran them through turbo tax. If you are familiar with turbo tax, and you just have rentals, then I think you can do it yourself. I actually changed my quickbooks chart of accounts to align with a schedule E, and that made it pretty straightforward. I just hate the idea of paying an expensive San Diego accountant for something that I can pretty much do own my own.

• 
  d_random1st June, 2005

  tcikevin
  
  Thanks for your feedback on turbo tax! Big help!