FL Real Estate Market

Quote from Smart Money:

You are allowed to depreciate the value of the building (but not the land) over a period of 27.5 years by straight line depreciation on houses, townhouses, etc. ...

So the tax break from depreciation (the $3630) is like gravy. Of course, you only keep the portion of the tax break based on your tax bracket...for example, if you were in the 30% bracket, you'd get to keep $1089 annually.
SM
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You will only get the "keep" the depreciation, if, and only if, you property is generating a profit before the depreciation greater than the depreciation.

Unless, you declare yourself a real estate professional - then you can deduct the loss against other income.

Big big factor these days.
 
Quote from Copernicus:

[
Its not really the prices in South Florida that have kept buyers on the sidelines, but costs associated with "maintaining it" How do you explain to a European that he has to pay 15k a year in property taxes on a property which he uses 3 months out of a year? Europeans do not even know what a property tax is, there is no such thing in Europe. [/B]
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Germany and France don't have property taxes? Since when? Also the Euro is 30% higher than the dollar. Certain property is just overpriced thats all.
 
prices may not be dropping significantly sf but are you taking in cosideration the value of median price compared to the same period yoy, in orlando prices haven't dropped that much according to the orl realtor assoc but i've seen more house bought per dollar than last yr, i live in tampa now and prices here are down 5% yoy, inventory still growing pretty fast but should slowdown after builders realize they can't build their way out of this later this yr
 
Quote from traderdragon2:

guy #1:they said the bottom was in, they really did..... *laughs*
guy #2: Now how you know the bottom isn't in? They say the bottom is in.

Guy #2 clearly has no idea where the burden of proof lies, since he just asked guy #1 to prove it isnt in, when "they" made the assertion, not guy #1


I see this all the time. Drives me nuts.
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I think guy #2 has probably owned more property than most people. Bottoms aren't made because 30 year olds read about it somewhere. We have horrible crime. We can't get insurance. A good hurricane, a 3 in a metropollitian area, a five anywhere, there will be none to be had. Those storage places you read about, the insurance rates went so high, wiped out all the profits for the year. And they don't give it back. We have a drought the maginitude that hasn't been seen in decades, wiping out growers. How do you see that makes a bottom. All I see is a pool with fewer buyers who can qualify, and they qualify for less. NE corridor people. Seen that three times. It's where I came from 20 years ago. Can't get any better for them. Think that traffic flow will increase? That, and the fact Dixie highway is absolutely laced with new and just beginning condos that "start in the high 300's", and the first step that you take puts you on dixie highway. Nice if you want a hooker and a crack hit. Not to appealing for the rest. For the first time in 20 years, foreclosures dot the neighborhood. My property values are up substancially, but down substantially from the top. I fully expect them to drop farther. The only break we will get is property tax relief thanks to Crist. If you need to sell, you price correctly, take the hit, and get out on the back of that. There is nothing else. the infrastucture in Florida is shot. They have built up the Everglades so much we don't even get the afternoon showers we used to get 10 to 20 years ago. The lawns are burnt to a crisp, and the landscapes are a disaster. Think you'll sell to Northeasterners with "Florida Scrub"???? I know a bit about selling, probably not as much as you, but they want to see "home".

You haven't got to be a Nobel Prize Winning Economist to see the handwritting on the wall. Drives me nuts, you know.
 
give you an example of how things are in orlando, my parents live on lake apopka, where there is a lot speculation due to the future expecations on its cleanliness(plus its a largeass lake), their neighbor who runs a fairly large lawn biz in area orginally listed their 2600ish sqft house for 380k thats not on the lake back in jan that literally looks like showroom house(inside and lawn/shrubbery are immaculate) was asking 380k finally sold a few wks for 305k, most likely he coulda sold 320-340k if he price right
 
Quote from danoXP:

You will only get the "keep" the depreciation, if, and only if, you property is generating a profit before the depreciation greater than the depreciation.

Unless, you declare yourself a real estate professional - then you can deduct the loss against other income.

Big big factor these days.
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Huh? Can you expound on this? Sounds like you're saying that if my expenses on a unit are $10,000 a year, and the depreciation is $3,000 a year, then I can only take the depreciation if my revenue (rents collected) are at least $13,001 a year. That doesn't sound right since depreciation is a real expense. It would be the equivalent of disallowing a loss on an investment as an offset to other income.

I have a damn good CPA and I always write off the depreciation against my day job income, even if the total write-offs, including depreciation exceed the income ffrom the property.

SM
 
Quote from Smart Money:

Huh? Can you expound on this? Sounds like you're saying that if my expenses on a unit are $10,000 a year, and the depreciation is $3,000 a year, then I can only take the depreciation if my revenue (rents collected) are at least $13,001 a year. That doesn't sound right since depreciation is a real expense. It would be the equivalent of disallowing a loss on an investment as an offset to other income.

I have a damn good CPA and I always write off the depreciation against my day job income, even if the total write-offs, including depreciation exceed the income ffrom the property.

SM
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It has to do with whether or not your RE activities constitute a "passive loss" or not. Just like investors in stocks can only write off $3000 in cap losses against ordinary income.
 
Quote from Smart Money:

Huh? Can you expound on this? Sounds like you're saying that if my expenses on a unit are $10,000 a year, and the depreciation is $3,000 a year, then I can only take the depreciation if my revenue (rents collected) are at least $13,001 a year. That doesn't sound right since depreciation is a real expense. It would be the equivalent of disallowing a loss on an investment as an offset to other income.

I have a damn good CPA and I always write off the depreciation against my day job income, even if the total write-offs, including depreciation exceed the income ffrom the property.

SM
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Passive Real Estate losses can only be offset against passive real estate gains. If you are reporting a passive real estate loss, and you have a good CPA, he is probably carrying that loss forward to the future, until, someday, when you have a real estate gain, you can then subtract if from your income. It is similar to capital gains (losses) rule, except that there is no $3000 allowance against income (like capital losses).


If you declare your real estate losses as "active", then they can be offset against all income, however, this is an IRS audit red flag if you get a W2 from an employer (you therefore cannot be active).

Here is the IRS explaination:
http://www.irs.gov/businesses/small/industries/article/0,,id=98881,00.html

I recommend downloading the Audit Guide and checking yourself against the "7 tests" in Chapter 5.
 
Quote from danoXP:

Passive Real Estate losses can only be offset against passive real estate gains. If you are reporting a passive real estate loss, and you have a good CPA, he is probably carrying that loss forward to the future, until, someday, when you have a real estate gain, you can then subtract if from your income. It is similar to capital gains (losses) rule, except that there is no $3000 allowance against income (like capital losses).


If you declare your real estate losses as "active", then they can be offset against all income, however, this is an IRS audit red flag if you get a W2 from an employer (you therefore cannot be active).

Here is the IRS explaination:
http://www.irs.gov/businesses/small/industries/article/0,,id=98881,00.html

I recommend downloading the Audit Guide and checking yourself against the "7 tests" in Chapter 5.
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Thanks for the information. I researched it. In a way, we are both right. As you correctly stated, even losses stemming from active participation in a real estate venture (i.e., Joe Schmo Landlord) is considered under the non-passive income/loss provisions. However, I found this little nugget straight from their website:

(Begin)**************
If you meet any of the exceptions listed above, see the instructions for Form 8582 for information about how to report any income or loss from the activity.

Special $25,000 allowance. If you or your spouse actively participated in a passive rental real estate activity, you can deduct up to $25,000 of loss from the activity from your nonpassive income. This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. Similarly, you can offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception.

If you are married, filing a separate return, and lived apart from your spouse for the entire tax year, your special allowance cannot be more than $12,500. If you lived with your spouse at any time during the year and are filing a separate return, you cannot use the special allowance to reduce your nonpassive income or tax on nonpassive income.

The maximum special allowance is reduced if your modified adjusted gross income exceeds certain amounts. See Phaseout rule, later.

Example.

Kate, a single taxpayer, has $70,000 in wages, $15,000 income from a limited partnership, a $26,000 loss from rental real estate activities in which she actively participated, and less than $100,000 of modified adjusted gross income. She can use $15,000 of her $26,000 loss to offset her $15,000 passive income from the partnership. She actively participated in her rental real estate activities, so she can use the remaining $11,000 rental real estate loss to offset $11,000 of her nonpassive income (wages).

(end excerpt)**********

So for us regular folks, you can still write off up to $25,000. For me personally, I have a decent paying white collar day job, but because my wife doesn't work, I get tax credits from 3 kids, and the fact that I get the $25,000 write-off (or damn close to it), I paid almost no tax last year (like...less than you might have in your car's ashtray). So anymore write-off than that would be wasted anyway (for me), unless I had so many properties that I had to quit my day job...and at that point, I'm betting I would be considered a "real estate" professional.

So it seems that the write-off they do give you is applicable for the casual landlord until they own a few to several properties.

Thank God, you had me worried about my CPA for a minute there. :)

SM
 
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