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Joined: Sep 2006
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Legend
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Legend
Joined: Sep 2006
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I own a house at the moment and have a mortgage but have toyed with the idea of moving back to an apartment.
There's one MAJOR problem with any apartment or condo that I've always had, it's that you can hear people through the walls. That's not the major problem from my perspective. The major problem is that if I bought a house 10 years ago and let's say, for sake of argument, my mortgage payment was $1500 (with insurance and property taxes built in) on a 30 year fixed... and somebody else rented an apartment 10 years ago and their rent was $1200... Today my mortgage payment is still $1500. (property taxes might have gone up a little but not that much) Their rent now could quite possibly be $1600-1700 or more. Average rent in the US has gone up 30% over the last 10 years, a lot more in some areas. Ten years from now, my mortgage payment is still going to be... $1500, even though my income will have gone up significantly over the last 20 years. Unless I aggressively paid of my 30 year fixed in 20 years, then my mortgage payment is $0 and I only owe the insurance and property taxes. And now I have an appreciating asset to sell to help fund my retirement or to leave to my kids or whatever. My rent could be $2500 or more and I own nothing. Rent has been rising faster than incomes on average so that nice 3-5% raise you get every year is being eaten up faster by the increases in your rent, which you have no control over. I'm not anti-renting, if people think it makes the most sense for them, if they move a lot or have other reasons, go for it.. but I enjoy having a yard for the dog and where the kids played when they were younger, I enjoy having a patio and a grill where I can entertain outside, I enjoy having a garage so I don't have to put the top up on the Jeep every night, I enjoy being able to decorate anyway that I choose and not have to worry about upsetting the landlord, my wife maybe but not the landlord.  True. Like you said, it depends on where you are at in life. I am currently typing from my recently leased apartment. We are in the downsize phase. We don't need 3500 sq ft. and are putting it on the market soon. Homes take upkeep and I for one finally got tired of doing it myself or finding someone to do the maintenance. But I do agree with you. You build equity with a home, value goes up, and payments remain constant plus any property tax hikes and insurance hikes. We were in our home here since 1986. We paid $165,000 for it then. I am not going to say what we will probably get on close, but it is a heck of a lot more than that. I will admit it is a sellers market here, so I figured now was a good time to cash out of the house. If my wife and I don't kill each other in a 2 bedroom, 1350sq apartment, we might just keep it this way. So far we like it, but it's only been a few weeks and aren't totally moved in yet, so you never know. .
If everybody had like minds, we would never learn. GM Strong ![[Linked Image]](http://www.dawgtalkers.net/uploads/small-gator-chomp.gif)
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Joined: Nov 2008
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Legend
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Legend
Joined: Nov 2008
Posts: 12,214 Likes: 588 |
My parents did the same thing and loved renting after owning for so many years.
There is no level of sucking we haven't seen; in fact, I'm pretty sure we hold the patents on a few levels of sucking NOBODY had seen until the past few years.
-PrplPplEater
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Joined: Sep 2006
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Legend
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Legend
Joined: Sep 2006
Posts: 40,398 Likes: 280 |
Peen, I haven't looked into the specifics but if you sell your house for that significant of a profit and don't re-invest that money in another home, don't you get hammered on capital gains tax for the profit?
yebat' Putin
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Joined: Sep 2006
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Legend
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Legend
Joined: Sep 2006
Posts: 38,504 Likes: 806 |
I let my CPA worry about all of that, but it is my understanding you pay on profits over $500,000 for a couple. It's taxed at 15%.
More than I might want to pay, but it is what it is.
Also, I never really looked at the home as a investment. My investments, or retirement nest egg was always separate from the home. A house is someplace you live but get the benefit of selling and making some money. My wife and i always viewed the house profits as money we are going to blow and trips and whatnot to irritate our kids.
But hey, we always told our kids they would be taken care of when we pass, but if they viewed us as their retirement plan, they better come up with another plan. ( they will be fine)
Just a story for emphasis. I quit drinking a year ago, 3 weeks ago. I haven't had a drop. Four days in the hospital with liver numbers WAY out of whack can do that to a person. I have no real long term problems according to the Dr....things are back to normal, but they aren't. My energy level is way down and looks like it's going to stay there. Again, it is what it is.
The point is I collected wine for decades. I have a cellar with 312 bottles remaining. Seriously, many have aged in to expensive bottles. Saving them to drink in the future....now I can't. So much for plans, right? That isn't going to happen the rest of the way.
We have things to do, and we are going to do them.
If everybody had like minds, we would never learn. GM Strong
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Joined: Sep 2006
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Hall of Famer
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Hall of Famer
Joined: Sep 2006
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I let my CPA worry about all of that, but it is my understanding you pay on profits over $500,000 for a couple. It's taxed at 15%. Yep. If the sold home has/had been your principal residence for ANY two of the last five years, each owner can exclude from taxation up to $250,000 of gain. Note: "Gain" is not the difference between what you owe and what you receive. Gain is the difference between what you have spent in/on the property (over the years; purchase + major renovations/additions) and the sales price after sales expenses. DC: You are thinking of the old principal home sale rules that required you to "move up" to avoid taxation and had only one exclusion over age 50. That went away a long time ago...replaced by the above paragraphs. FYI: A person's actual capital gains tax rate gain be a little complicated...but 15% applies to the largest group of people in my experience.
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Joined: Sep 2006
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Legend
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Legend
Joined: Sep 2006
Posts: 38,504 Likes: 806 |
It's a bad situation, but a question. Is it right for landlords to not be able to collect rent?
There is really only one correct answer to that, so I know you would say no. Every time I hear this kinda thing, I always have to wonder what people are thinking.. Did they forget how much PPP money was handed out to retail business, rental properties and many others.. They got paid,, or at least could have had they merely applied... Sorry for the late reply. To be honest I am not sure how it works, so I am not sure what you are thinking. Why would the landlord have to be the one to apply for government funds? Shouldn't it be incumbent on the individual in default be the one who needs to apply? If a person needs food assistance, the grocery store isn't the one who has to get then signed up. It was up to me to sign up for Medicare, not my Doctors job to get me signed up. I'm not sure what you are talking about??
If everybody had like minds, we would never learn. GM Strong
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Joined: Sep 2006
Posts: 14,475 Likes: 162
Legend
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Legend
Joined: Sep 2006
Posts: 14,475 Likes: 162 |
And the institutional landlords also write off all those expense on a yearly basis AND get to write off the standard depreciation of nearly 4% of the purchase price... every year (up to 26 years). On a 500,000 property that's 20,000 of reduced tax liability before any of the year-to-year expenses.
If it's a multi-unit they are likely writing those off faster... you can do a cost segregation to accelerate depreciation.... when you sell the government will recapture the depreciation through taxes, but there are some incentives to delay the tax hit.... Edit: and any landlord should be taking advantage of tax incentives for being a landlord...not just institutional landlords
Last edited by jaybird; 09/05/21 12:06 PM.
<><
#gmstrong
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Joined: Sep 2006
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Legend
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Legend
Joined: Sep 2006
Posts: 14,475 Likes: 162 |
Peen, I haven't looked into the specifics but if you sell your house for that significant of a profit and don't re-invest that money in another home, don't you get hammered on capital gains tax for the profit? As others have said, for a primary residence you can gain $500k as a married couple before worrying about paying tax... for investment properties you can roll that profit into another property using a 1031 exchange... there's a lot of rules on it and needs to be done through a 3rd party (so you never touch the money). A new property needs to be identified within 45 days and closed on within 180 days... so they are tricky. But that allows you to defer your capital gains tax... you'll eventually pay the taxes unless you die and the basis gets stepped up to your heirs...
<><
#gmstrong
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Joined: Sep 2006
Posts: 14,475 Likes: 162
Legend
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Legend
Joined: Sep 2006
Posts: 14,475 Likes: 162 |
I always figured a rental property or two would be part of my retirement plan at some point... but I don't know if I have the patience to deal with people like that. We've had several rentals, but sold some off over the last few years as we've gotten older and the desire to spend our free time turning them over between tenants has lessened. If you have a management company handle it, it might not be so bad, but then you're paying for that service. We are down to just 2 units, both with long term tenants, and both pretty much maintain little things themselves , and just send us copy of the receipts, which we deduct from their next rent plus a little more if labor was involved. The one property is one we plan to keep as it's small with little upkeep, so we figure when we get older and can't maintain our current house, we will sell it and downsize to that one. That's awesome Florida! I recently starting investing in real estate with my brother in law. We currently have 4 long term rentals and are hoping to get a short term rental soon... it's been a wild ride but pretty fun so far...
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#gmstrong
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Joined: Sep 2006
Posts: 40,398 Likes: 280
Legend
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Legend
Joined: Sep 2006
Posts: 40,398 Likes: 280 |
I let my CPA worry about all of that, but it is my understanding you pay on profits over $500,000 for a couple. It's taxed at 15%. Yep. If the sold home has/had been your principal residence for ANY two of the last five years, each owner can exclude from taxation up to $250,000 of gain. Note: "Gain" is not the difference between what you owe and what you receive. Gain is the difference between what you have spent in/on the property (over the years; purchase + major renovations/additions) and the sales price after sales expenses. DC: You are thinking of the old principal home sale rules that required you to "move up" to avoid taxation and had only one exclusion over age 50. That went away a long time ago...replaced by the above paragraphs. FYI: A person's actual capital gains tax rate gain be a little complicated...but 15% applies to the largest group of people in my experience. 
yebat' Putin
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