No, most of the space is in the front.
My $700 loss includes principal payment. My monthly payment is 2500 including principal and interest.
Sorry, my bad, my wrong calculations.
jksram is right at $700/month, which is $8400/year.
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Yes, about $8000 negative cash flow a year assuming no vacancies. Adding another $4k for vacancies and repairs, it probably will be about $12000. Conservative calculations may put it higher.
Most of the forum viewers are able to withstand such negative cash flow including me.
Reason for that hold is appreciation. One year 5% appreciation is $35000 and it is easy to write off $12000 from it and in 5 years you stand to gain appx $100000, =(35000-12000)*5, easily.
It is up to your comfort to hold or sell.
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If you want cash flow 1031 into Tahoeā¦I have a house near $700k that is a 7capā¦Have had a couple of offers will sell soon . Hard to get cash flow in the BA. Turn $12k negative into $20k or more postiveā¦I am at $50k positiveā¦no loanā¦short term vacation rental. Gross $6000/m
Now, I fixed my calculation sheet. In fact, jksram has slight positive ROI, but negative cash flow including principal amount.
By reducing property management, EQ insurance and gardening, he gets better cash flow.
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In above how do you calculate net gain/loss?
Net gain is after principle is added back.
PITI + Expenses = 3407.34
Principal is 874.
Rent = 3000.
Rent - PITI - Expenses + Principal = 3000 - 3407 + 874
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Thanks. I sucked at accounting at my b-school.
How about cash-flow after taxes? Using depreciation, he might be able to show his rental as a lossā¦ how much he can use depends on his AGI and type of income. A break-even before taxes may end up cash-flow positive after taxes.
I removed depreciation as it confuses lot of people, except experienced ones.
jksram is a passive rental investor like me (i.e., whoever does not work 750 hours/year on real estate) and can not reduce from the regular W2/1099 income. All passive losses need to accumulate and set right during sale of that property or other passive real estate. Passive loss will not affect his active income AGI.
If someone claims such, it results IRS audit. One of our members went through such audit and finally complied IRS rule.
If income is below $150,000 you can still deduct up to $25,000 in RE losses as a non professional. it gets phased out over $150,000. not sure about ops income level.
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thatās rightā¦ at least thatās how it was 2003-2008 when I fell in that category. Thatās why I mentioned OPās AGI (and type of income) in my previous comment.
I think the PM cost should be added back. The whole reason @jksram included it was because of his declining health which means he canāt actively manage it.
My AGI will be less than $150K next year. I may be able to deduct the loss.
I am thinking of keeping the house for now and see how things turn out next year. I will certainly have more realistic picture of rental experience and costs. Thanks everyone for the analysis. There is absolutely no way I could have done it by myself.
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What a passionate group of investors/advisors out here. Crunched numbers, debated back and forth and owned the OPās problem as if its their own!!
Love it!
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Glad to hear that. IMO, keeping PM as harriet told is better.
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I personally think a good handyman is worth more than a PM. I was ready to sell my Tahoe apartment building because the of maintenance and management head aches. The maintenance on my 1953 built building is much more annoying than the tenants. I found a prospective tenant today that can maintain the building. Instead of paying $7k per year for management I can pay him $3500/year to handle the maintenance and whiners.
What about water,sewer and garbage expenses ? $100-
$200/m