Houshphandzadeh wrote:why not just invest that money in something that doesn't require being a landlord instead

There's some tax breaks associated with being a landlord.

1) You get to deduct all costs of owning the property, including repairs and common charges/HOA fees. This is on top of the deduction you get for mortgage interest and property taxes that you would get if you lived in the property.
2) You get to depreciate the property over 27.5 years.
3) You take your rental income, subtract numbers 1 and 2 above and that's your net rental income. It almost always is a loss. You can deduct that loss against your W-2 ordinary income (up to 25K a year as long as you are actively managing the property).
4) In theory, the property value will go up over the course of time, so you get a profit when you sell (net profit = sale price - (purchase price - depreciation taken)) taxed at the long term capital rate of 15% (currently - might go up to 20% depending on Congress))

Anyone considering this has to balance the expected gain (minus taxes) vs the expected gain of whatever your down payment can earn invested in other things (minus taxes) and also consider that cashing out on the house can take a decade or more, so you have to discount the future value of that money vs shorter term investments.

a foot of fresh snow by sunrise, my snowboard, a couple of friends, and four wheel drive.... life is good. and a good skrillex/bassnectar mix on the ipod.

and probably i shouldn't be doing this, but it could very well be my last hoorah.... creepin' the mountain for those 18-20 year old chicks. and even though i definitely won't follow up on anything this time around. a little tip to keep each and everyone out of jail, because azrider really frowns on the concept of incarceration... get them to get you a pack of smokes at the circle k, and if you see them get served, you're good to go!

lethal wrote:1) You get to deduct all costs of owning the property, including repairs and common charges/HOA fees. This is on top of the deduction you get for mortgage interest and property taxes that you would get if you lived in the property.
2) You get to depreciate the property over 27.5 years.
3) You take your rental income, subtract numbers 1 and 2 above and that's your net rental income. It almost always is a loss.

lethal, no doubt your tax analysis is impeccable, but using my own manse as a (poor) example, I can't get to a "loss" figure using local rental rates unless I exaggerate either the value of the house, or the ownership costs, or both.

That is unless there's an interesting twist to the depreciation formula in which I could "accelerate" the property's depreciation into the early years of its rental

being a landlord in my area seems like a losing proposition unless you get some REALLY good tenants. wages are low, rents are super low and there's a large transient population that live month-to-month. i guess that's why lots of properties are sub-standard.

drsmooth wrote:

lethal wrote:1) You get to deduct all costs of owning the property, including repairs and common charges/HOA fees. This is on top of the deduction you get for mortgage interest and property taxes that you would get if you lived in the property.
2) You get to depreciate the property over 27.5 years.
3) You take your rental income, subtract numbers 1 and 2 above and that's your net rental income. It almost always is a loss.

lethal, no doubt your tax analysis is impeccable, but using my own manse as a (poor) example, I can't get to a "loss" figure using local rental rates unless I exaggerate either the value of the house, or the ownership costs, or both.

That is unless there's an interesting twist to the depreciation formula in which I could "accelerate" the property's depreciation into the early years of its rental

Well, it may not work for you if you have low mortgage interest expense and taxes or the lesser of your adjusted basis or FMV is very low (any of which may be the case if you have owned the house for some time), but presuming purchasing a new dwelling for the purpose of renting it out and financing it with a 80% mortgage, it should get you into loss territory.

In a simple example, presume that you rent a place out for the exact same price that you pay per month on a mortgage. About 1/4 of that payment is principal and 3/4s is interest and taxes. So before depreciation, you are already deducting 3/4s of your rental income. Depreciation over 27.5 years gives you 1/27.5 per year. Hypothetically speaking, say you have a 100K unit. You borrow 80K to buy it. Per month, the mortgage is $500, which includes taxes of $75 and HOA fees are $25. $300 is interest and $100 is principal. You rent out th eunit for $500 a month.

So per month, your income is $500. You get a deduction of $300 for the interest, $75 for the taxes and $25 for the HOA. You have a net of $100. You depreciate the $100K over 27.5 years for $3636 per year or roughly $300 per month. So you run a $200 loss each month, roughly a $2,400 loss per year. If you can only rent out for $400 a month, you're already break even before depreciation, so you lose $100 a month in real money, recoup $300 a month in a tax deduction, put yourself in the 25% tax bracket, that's a $75 tax savings, so you're almost breaking even in real money even if you lease out at below your carrying charge rate.

If you've paid off most of your loan, one technique may be to refinance the house to take out equity and increase your monthly costs. Your borrowing costs would be about 4%. You might use that cash to invest elsewhere for a greater rate of return. You might be able to claim the interest as a deduction and make your rental property a tax loser. There are some fairly complex rules regarding home equity debt and tax deductions, so beware of those. Also, the interest from that loan, if the loan proceeds were used for investment, may be deductible if it isn't deductible as home mortgage interest.

Publication 936 is useful here. http://www.irs.gov/publications/p936/ar02.html

the lobster sub at quiznos is advertised as 51% lobster. it looks awful.

The guy behind me in line ordered one last week. It really does look nasty. My go-to at Quizno's is a Regular Traditional but I always feel like a pretty boring dude when ordering it.

i can't remember the last time i had quiznos. i remember driving to the nearest one (45 minutes away) at least once a month when i first discovered it. then we got a couple nearby, and i hardly ever went.

You drove 45 minutes to go to Quiznos more than once?

1 wrote:i can't remember the last time i had quiznos. i remember driving to the nearest one (45 minutes away) at least once a month when i first discovered it. then we got a couple nearby, and i hardly ever went.

Tell me you drove all the way to Trooper, PA

jerseyhoya wrote:You drove 45 minutes to go to Quiznos more than once?

That wasn't our only destination, but yes.

I've never been to a Quizno's. There was one in State College that was too far to be worth walking to. There's one I walk by in Center City all the time but never when I'm eating awful food

Barry Jive wrote:I've never been to a Quizno's. There was one in State College that was too far to be worth walking to. There's one I walk by in Center City all the time but never when I'm eating awful food

never go.

its ridiculously overpriced garbage.

ive now done ten versions of the 20 questions. and i think only one or two repeat questions.

its harder than youd think coming up with interesting questions.

Proud of ya.

FTN wrote:

Barry Jive wrote:I've never been to a Quizno's. There was one in State College that was too far to be worth walking to. There's one I walk by in Center City all the time but never when I'm eating awful food

never go.

its ridiculously overpriced garbage.

I go to Subway a lot, far too often, hate myself every time, because being dedicated to packing a lunch while you're on shift work and don't have a car is annoying as shit, and there's a Subway right around the corner from my relatively isolated office building. That's bad enough

yea but subway is like 20x better than quiznos.

FTN wrote:ive now done ten versions of the 20 questions. and i think only one or two repeat questions.

its harder than youd think coming up with interesting questions.

as someone who wrote fluffy bullshit band Q&As more times than could really be warranted for his college newspaper, I feel your pain. Got to talk to some vaguely famous people at least. None were as cool as most of the people in your 20 Questions series

FTN wrote:yea but subway is like 20x better than quiznos.

this is actually comforting. thanks