Tax Question/new Start

Comments(8)

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  way_motivated12th March, 2004

  i don't think one should ever consider qutting your job to pursue real estate full time until you know what you're doing even if your wife makes enough for both of you. I would start off by using as little cash as possible, $200-$500. You start off thinking you have 70k to blow chances are you probably will. Use the $200-500 to get some fliers/signs/postcards/ done and hit the streets. Go to your local REI club meetings and start showing up at auctions (if that's what you plan to do). Since you're not too clear on what kind of investing you'd like to do I would maybe buy some courses to get a good idea of where you're headed and what you want tp pursue....

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  wayneL12th March, 2004

  Thanks for your valuable advice, way_motivated. I am now thinking about buying either a small apartment or a couple of condo. I want to rent it out and hold it for some years. If I can make money long term, I would be happy. I will follow your advice, and start checking things out while I am working full time. I live in San Diego, could not find the REL clubs here in this forums.
  
  Thanks again,
  WayneL

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  ELOCK12th March, 2004

  I agree with way.
  I myself started with considerbly less but I found that I blew through it pretty quikly through inexperience (and lack of spelling lol ). Stay with your full time job read and learn and visit this website often there are alot of people here that can help you enormously.
  
  
  As for tax advantages its the only paycheck Uncle Sam dosnt plunder.
  
  Read and Learn
  
  ED

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  Tedjr12th March, 2004

  The max income you can shelter is $25,000 with passive losses like real estate. You can offset income with real losses to some extent but who wants to lose money to save tax. There is already enough disincentive to adding extra income and getting taxed at higher rates. A bit hard to buy and make cash flow where you are. Prices are high but rent not high enough. I like duplexes instead of condos as the cash flow is better.
  
  Good LUCK and Thank You
  Hope this helps some
  Ted Jr

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  DaveT12th March, 2004

  Quote:I am wondering how much tax I can shelter if we buy an apartment /condo complex. wayneL,
  
  You don't shelter taxes, you shelter income. In your case, a passive real estate investment such as an apartment or condo complex will not shelter any income. The $25K passive loss allowance that Tedjr alluded to does not apply when your combined taxable income is $150K or greater. In your case, I expect that your combined incomes are too high to be eligible for the passive loss allowance.
  
  In most cases, the net passive loss from real estate investments is due to depreciation, an expense that does not cost you any money out of pocket. As a rental property owner, you can have a positive cash flow from your rental activities and still have a net passive loss.

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  wayneL12th March, 2004

  Dave,
  
  Thanks for my advice. Regarding the tax savings, I think I could write off more than 25K if I choose the career as my primary career--I think I read it from the "Unofficila guide of ..." book. One of my motivations here is to offset our income by investing in real estate. owning rental properties, I thought, is one of the best ways of doing it. Well, that was my impression anyway.
  
  really appreciate Ted and Ed's response as well.
  
  Thank you,
  WayneL

• 
  DaveT13th March, 2004

  The $25K limit on passive loss allowance against ordinary income is waived for real estate professionals.
  
  To be a real estate professional, you must be engaged in an active real estate business or related activity. There are also material participation rules involved.
  
  Rental property operation, by default, is defined by the IRS as a passive income activity regardless of your level of active participation. So, just spending all your time in rental property operations for your own property, will not qualify you as a real estate professional.
  
  I guess you should take your "Unofficial Guide to ..." to a licensed tax professional in your state to clarify specific details about your proposed strategy.[ Edited by DaveT on Date 03/13/2004 ]

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  niravmd7th April, 2004

  welcome to the board. its good to see a fellow san diegan!
  there is a great RE club here in san diego - http://www.sdcia.com.
  
  i spent 2 years reading and attending seminars/meetings before i ventured into real estate. i'm an engineer by profession too. i'm waiting for my wife to graduate and start making money before i quit my job. unfortunately she's an accounting major so i guess it'll be a while before she crosses 6 figure salary range.
  
  hope to see you at the next RE meeting. its on april 14th.
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  Wrong or misleading tax advice deleted from this post.[ Edited by DaveT on Date 04/08/2004 ]