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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: David Jones who wrote (42550)	10/4/2005 1:23:26 AM
From: GraceZ	Read Replies (3) \| Respond to of 306849

Oh sure they can sell it within three years and still take the gain tax free but it sounded like they were going to convert it to a rental and continue to hold it as a rental. The tax hit when and if you finally do sell a rental can come as quite a shock to most people. A lot of first time landlords find out after a few years that they absolutely hate being a landlord and it isn't all gravy. There have been many times when I could say this for myself. The way I see rental properties is that if you use your own money to buy them you are missing out on the only real advantage you get from buying rental properties, tax neutral cash flow on OPM. Of the two properties we own, both were bought for less than 20k of our own money and have never had an additional cent added to them that didn't come from the rents. I don't know what these people originally paid out to acquire the house they turned into a rental, but even if it is a tiny amount, the moment they turn it into a rental they are using their own money in the form of the cap gain and the return should be calculated on the entire sum. In other words, if they have 200k of equity in there, the return they get should be calculated on that amount even if the property might only have 60k of their own money. Because they need to compare the return to what they might get in some other tax deferred vehicle that won't call them up on a Saturday night to tell them that water is pouring from the lighting fixture in the dining room.