Rentals
This is for the people who have rental houses. When you have a rental that has a morgage payment of $200.00 a month, taxes $150.00 a month,Ins $50.00 and it rents for $ 450.00 it looks like a lot of trouble for $50.00 bucks. Or can these things be written off at the end of the year? Thanks Monte
Yes taxes and insurance are the cost of doing business, so you can deduct them. You can also deduct your intrest as well as take depreciation, which protects your personal income from taxes. AND, as a bonus, your tenant is paying down your mortgage which builds your equity, so some day, you will ahve a free and clear house to rent or sell and it cost you nothing. It's not a quick way to get rich, but with your #'s, give that to me and I'll take it every day. Positive cash flow is the name of the game.
Good Luck and make $$$
Tom
You are right, it is a lot of trouble for only $50 monthly cash flow. Add in the occasional vacancy and your annual cash flow is negative.
One small compensation is a phanton expense called depreciation. Depreciation does not cost you anything or take any money out of your pocket (it is a phantom, after all) but you are allowed to take an expense for it anyway.
The depreciation expense offsets your total income for the year and makes your $50 monthly cash flow tax free.
In Robert Allen's original "Nothing Down" book, he said that most investors would not find that $50 monthly rental income very exciting, then asked "but what if you had 50 of these properties?"[ Edited by DaveT on Date 04/26/2004 ]
Thanks for the replys Monte.
$50 a month isn't even enough to cover certain maintenance costs.
For example, I just replaced the gas furnace in one of my units for $660.
If I were only clearing $50 per month, it would take me more than a year to recoup my expense.
[addsig]