Author Topic: How did you get started in Real Estate Investing?  (Read 11633 times)

hurricane0884

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How did you get started in Real Estate Investing?
« on: April 17, 2013, 03:08:14 PM »
I tried searching for a similar topic on MMM and didn't find anything. Sorry if this is a repeat question!

I am curious how people generally start investing in real estate. I have started reading some books and plan to try and make a move in August of this year. I am going to try and qualify for a second mortgage. I will be debt free other than my first mortgage and according to the 28% loan to income lending standards I should qualify for another... assuming my theory is correct. If you know better please correct me.

I was just curious if a lot of people try this route or go with private funding, REITs, hard money or another source for their first few deals?

Thanks!

arebelspy

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Re: How did you get started in Real Estate Investing?
« Reply #1 on: April 17, 2013, 03:37:02 PM »
Do conventional funding for as long as you can.

If you can qualify (meet the income, DTI, credit requirements), lock in today's low rates.

You'll eventually max out on loans if you're serious about real estate investing, but that'll take awhile, and then you can do more creative stuff, but if you have the means, conventional is great, IMO.

Definitely read as much as you can: forums, books, etc.
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Another Reader

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Re: How did you get started in Real Estate Investing?
« Reply #2 on: April 17, 2013, 03:47:58 PM »
Do you have an idea of what you want to invest in and where?  You are late to the party if you want to invest close to home.  Prices in Arizona now are well above what makes investment sense.

Start reading the Bigger Pockets blog and consider joining the local real estate investors' association or at least attending a few meetings.  Start talking to lenders about what you will need to do to qualify for financing.  Rental loan underwriting is different than owner-occupied and you should be prepared.

jamccain

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Re: How did you get started in Real Estate Investing?
« Reply #3 on: April 17, 2013, 11:56:01 PM »
I'm sure you're going to get a ton of great advice, but allow me to state the obvious....I got my start when I bought my first place.  You can read and learn until you're blue in the face...there are a million books, sites, programs, etc.  You won't start investing until you start investing. 

Be as wise as you can be...be patient...FIND A MENTOR AND USE THEM...but at some point you actually have to buy something.

At least have a basic plan in place first...

1. What type of properties do I want to own?  Why?
2. How will I finance them? Why?
3. How will I manage them? Why?

Also, know what you're trying to accomplish and how your plan supports it.


calmloki

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Re: How did you get started in Real Estate Investing?
« Reply #4 on: April 19, 2013, 02:38:32 PM »
Bought unimproved land in Twin Rocks Oregon via tax sale while in the Navy.  Didn't make much, but less of the Navy pay went to booze and overseas port entertainment.  Bought a rough condition house because the VA bill was there.  Got together with a lady who was getting a divorce and her ex stayed in their house till his rent ate up his equity, leaving her the sole owner.  Bought an owner carry contract house from an estate just before it was made a practice burn, then we spent 5 years showing off our taste and abilities doing a full re-do.  Rented it out.  Bought a house owner-carry in rough condition, fixed it up, rented it out.  Bought a horrible condition 9-plex close to a college, borrowed against the great condition practice burn house to buy and repair.  Rented it out.  There was sort of a theme...

hurricane0884

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Re: How did you get started in Real Estate Investing?
« Reply #5 on: April 19, 2013, 04:11:24 PM »
Thanks everyone for the responses thus far!

I have definitely thought out some of my plan. I want to purchase and rent out single family or small multi family homes. However, I agree Arizona is now not the best spot to invest for a long term hold. I will need to do some more research. I do get to travel around the country for my job about one week a month. I plan to start looking in other markets around the country. I know many people like Texas, Tennessee and Vegas (although I think that ship has sailed as well).

I am reading the book Millionaire Real Estate Investor currently. Does anyone have any other good real estate books that they liked?

Dianas Report

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Re: How did you get started in Real Estate Investing?
« Reply #6 on: April 20, 2013, 12:37:57 AM »
Personally, we bought a single-family home in an area with high demand (Hawaii) that has extra living arrangements built into it, which we rent out. If that's something that interests you, definitely buy a home with multi-family dwellings to help with mortgage.

If you like it, then you can move your way into multiple dwelling homes/units.

Check out  http://www.biggerpockets.com  that site is full of info regarding real-estate

Target properties in stable neighborhoods with good schools and located near employment opp., hospitals/university. Make certain your rental income makes a profit and covers everything from mortgage, insurance & taxes. This is not "flipping a home" and should be a long term investment.

Be wary of foreclosed or distressed properties in your area. Type the zipcode in realitytrac.com. Distressed owners tend to fall behind on lawn cutting, maintenance, paint long before it officially becomes foreclosed. If you see several places in despair, don't expect your home value to rise soon.

How much to charge in rent? Compare prices on trulia.com, zillow.com, your realtor should be able to give you information on rental rates from a few years ago.

arebelspy

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Re: How did you get started in Real Estate Investing?
« Reply #7 on: April 20, 2013, 07:56:30 AM »
All good advice form Dianas (besides the quotes around flipping a home, as if it's a distasteful thing?), except for one quibble:

your realtor should be able to give you information on rental rates from a few years ago.

I'd suggest using the rental rates from today, rather than a few years ago.  :)

The MLS has rental comps, not just sales comps, that a Realtor can access.

(And if you're looking for a trend in rates, there are better resources than making your Realtor try to use back data for that, IMO.)
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
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Johnny Aloha

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Re: How did you get started in Real Estate Investing?
« Reply #8 on: April 21, 2013, 07:48:26 PM »
We got started by luck.  After searching for a primary residence for about 3 years (and over 50 offers), finally got one in contract.  Luckily it was a multi family in a great area.

Then there was another house with great potential sitting on the market.  And interest rates kept dropping.  So we put in a very lowball offer and accepted a reasonable counter offer.  At that point we had the duplex rented out for way more than I thought it would bring in.  And within 48 hours.

Then we added a studio apartment onto the new house.  So now we have 3 rental units.

Then I got serious about real estate (thanks to this forum and bigger pockets!!) and realized these purchases are cash flow positive but not great investments since they don't meet some rules of thumb (50% rule, 1% or 2% rule, etc).  So now we're in the process of buying some properties that do meet those rules of thumb.

We may end up selling the duplex if prices appreciate as predicted (15-20% this year alone) and move that money into more efficient property.

Nords

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Re: How did you get started in Real Estate Investing?
« Reply #9 on: April 21, 2013, 08:11:52 PM »
I am curious how people generally start investing in real estate. I have started reading some books and plan to try and make a move in August of this year.
Plan-- pfffft.

We became real estate investors because spouse found our dream home in a better school district.  At the time we were both on active duty (with a very active seven-year-old) and it was definitely a buyer's market.  The dream house has great bones but it was in terrible shape, so it was a significant investment in sweat equity.  The house was a once-in-a-lifetime bargain at the pit of the market.  However there was no way that we could buy a house, rehab it, prep the other house for sale, and handle the sales process. 

Luckily we qualified for a huge honkin' mortgage on our new primary residence, and we rented out the old one.  It's been nearly 13 years now, and I think my rental exit strategy is "probate". 

My point is that your housing needs may change over the years.  You may want a bigger place, a smaller place, or a more kid-friendly neighborhood, or a more urban walk-about lifestyle.  When that happens, you could leverage your employment (or your savings) to buy your new place and rent out your old.

Our two timeless classics have been:
(1) Investing in Real Estate, 4th edition or later, by Andrew McLean & Gary W. Eldred (who's taken over the new editions) and
(2) Landlording by Leigh Robinson (7th edition or later).
Both are widely available at public libraries.

I also like Frank Gallinelli's analysis site, RealData.com.  I think you get enough from reading the free material without buying the products.

We may end up selling the duplex if prices appreciate as predicted (15-20% this year alone) and move that money into more efficient property.
If that's the one MMM worked on last December, then you may want to start thinking about putting it on the market this summer.  The "seller's market" light is lit and I think it's going to be shining very brightly.

We just went to an open house for a Central Oahu neighborhood that we know well.  The 34-year-old house was priced at least 10% above market (and 25% above assessment) and was in crappy condition.  They didn't even bother to try to clean it up or stage it-- just "as is".  Original toilets, f'gosh sakes.  (I'd sell them to the Smithsonian.)  The realtor had an offer before the open house but decided to do it anyway.  It's one of those places where you'd have to put in new windows, new appliances, new kitchen counters, another $5K-$10K, and lots of sweat equity-- even after bidding over the $675K listing price.  It'll be interesting to see if they crack that neighborhood's $700K barrier.

arebelspy

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Re: How did you get started in Real Estate Investing?
« Reply #10 on: April 22, 2013, 07:46:18 AM »
arebelspy, in most cases, by the time your done paying for all the remodeling & taxes on gains, your better off not flipping.
Loophole: if your handy at remodeling, you can live in it while you rehab the place for 2 years and then sell it tax free on capital gains up to $500,000 if married which is probably the most tax friendly approach =) We might take this approach if the right investment property reveals itself to us.

I disagree, as do almost all flippers who actually do it for a living. 

And I don't rehab myself, I pay contractors and subs. And your flip better not be taking two years if you're doing it right.

You are describing something totally different than flipping.

** I have recently discovered that you can actually buy real estate into your IRA, a true self-directed IRA.

Of course you can, but you'd better do a lot more research into that first, it sounds like.  There are some big restrictions.  You can't live in the place.  You can't do any work on it (not even plunge a toilet or pick up a paintbrush) without running afoul of the IRS.  It has to be totally hands-off.  You can collect rent and screen tenants, and that's about it.

I personally wouldn't be investing in rentals inside a self directed retirement plan due to these reasons, but would invest in other forms of real estate (namely notes and hard money/private money loans).
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
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Johnny Aloha

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Re: How did you get started in Real Estate Investing?
« Reply #11 on: April 23, 2013, 05:43:55 PM »
If that's the one MMM worked on last December, then you may want to start thinking about putting it on the market this summer.  The "seller's market" light is lit and I think it's going to be shining very brightly.

We just went to an open house for a Central Oahu neighborhood that we know well.  The 34-year-old house was priced at least 10% above market (and 25% above assessment) and was in crappy condition.  They didn't even bother to try to clean it up or stage it-- just "as is".  Original toilets, f'gosh sakes.  (I'd sell them to the Smithsonian.)  The realtor had an offer before the open house but decided to do it anyway.  It's one of those places where you'd have to put in new windows, new appliances, new kitchen counters, another $5K-$10K, and lots of sweat equity-- even after bidding over the $675K listing price.  It'll be interesting to see if they crack that neighborhood's $700K barrier.

Not the house we worked on, a different house.  The seller's market light is on full blast over here.  Pretty much every open house in my area has many offers, and multiple cash offers over asking price.

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Re: How did you get started in Real Estate Investing?
« Reply #12 on: April 23, 2013, 10:55:57 PM »
arebelspy, if you are a seasoned professional, that is a totally different ball game. Hurricane0884 is a newby, so he/she should not flip unless...

they get a team together that really know what they are doing. Newby's watch this: http://www.youtube.com/watch?v=EudeRC3p5rQ

Yes, if your flipping you get in and get out ASAP, but that is not what I suggested. Buy a good property in a desirable area as your primary residence, fix it up, live in it min.

Yes, there are restrictions with adding Realestate, but I thought I would mention it because it is a cool concept. A good book on that subject is: "The Insider's Guide to Tax-Free Real Estate: Retire Rich Using Your IRA" by Diane Kennedy
« Last Edit: April 27, 2013, 12:39:28 AM by Dianas Report »

ultrarunner

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Re: How did you get started in Real Estate Investing?
« Reply #13 on: April 25, 2013, 04:57:29 PM »
in most cases, by the time your done paying for all the remodeling & taxes on gains, your better off not flipping.


I really wish more people would heed this advice, so I could make more money on flips. :-)

arebelspy

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Re: How did you get started in Real Estate Investing?
« Reply #14 on: April 25, 2013, 06:43:21 PM »
arebelspy, if you are a seasoned professional, that is a totally different ball game. Hurricane0884 is a newby, so he/she should not flip unless...

I would argue that one should treat it like a business just as the professionals would.  I would complete your sentence with "he gets the required knowledge" - there are numerous ways to do this.


Newby's watch this: http://www.youtube.com/watch?v=EudeRC3p5rQ

Come on.  This guy is saying buying at 40% of ARV (typical rule of thumb is 60-70%) is not going to be worth it.

Ridiculous.

So he eventually advocates wholesaling it to another investor, who would then fail even harder than you would (because he says you'll only make 11k, so if they pay you 10k, they would only make 1k).  He's saying it's not worth it for you to rehab, but it is for someone else, or else you're looking for a greater fool (if you buy into his idea that flipping is foolish), or if they're a contractor who can save on the rehab costs.  (How about this: partner with a contractor for a win-win.)

This guy has a wholesaling mentoring course he wants to sell.  What a shock he's pushing wholesaling.

Yes, if your flipping you get in and get out ASAP, but that is not what I suggested. Buy a good property in a desirable area as your primary residence, fix it up, live in it min. 2 out of 5 yr.'s (you can rent inbetween) and walk away with a pocketful tax free. SIMPLE.

Yes, flipping is what we were talking about, then you changed to something that is not flipping.  Also your idea of living in it to make it tax free is flat out false.  It's not tax free, it's prorated based on the amount of time you lived there out of the past 5 (so only some of the taxes are sheltered).  Your incorrect tax advice could get someone in a lot of trouble.

Yes, there are restrictions with adding Realestate, but I thought I would mention it because it is a cool concept.

Yes, and the biggest restriction is you can't live in it, you can't repair it yourself, etc.  To mention the idea in the same post as talking about how someone should live in a home and repair it is misleading, at best.  Another thing that could get someone in a lot of trouble.

I can't decide if you're trolling, or just mistaken with a lot of these things.  Your initial posts on the forum led a lot of people to call you on trolling, but I decided to leave it alone.

But please stop offering incorrect advice regarding taxes and real estate investing.  It's really, really dangerous, and you have done it multiple times, often in a single post.

To anyone reading this: please consult your own attorney and CPA, and don't listen to random yahoos on the internet, myself included.

I really wish more people would heed this advice, so I could make more money on flips. :-)

Yeah, I just hate to see people spread FUD.
« Last Edit: April 25, 2013, 06:44:58 PM by arebelspy »
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
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ultrarunner

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Re: How did you get started in Real Estate Investing?
« Reply #15 on: April 25, 2013, 07:12:31 PM »

I really wish more people would heed this advice, so I could make more money on flips. :-)

Yeah, I just hate to see people spread FUD.

Maybe I should have put that in <sarcasm></sarcasm> tags to make it more obvious. ;-)

Dianas Report

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Re: How did you get started in Real Estate Investing?
« Reply #16 on: April 25, 2013, 11:52:52 PM »
arebelspy, As far as I know, all the advice I posted is valid. The video link is not the greatest but has some insights that many people don't consider. New flippers think it is easy to do flips and then get stuck with unsold houses because they bought to high and wanted to sell higher but couldn't or didn't think it would cost sooo much to do a flip. And holding the property too long with high monthly mortgage payments cut into their profit. I know plenty of people that experienced that a couple years ago. This also depends on many variables like market, timing, location, etc. Now, that doesn't mean you can't make money doing flipps, of course one could but I personally don't like that method. My current home was "flipped" and everything is falling apart. I wish it wasn't because now we have to replace & repair everything.

I did describe three different ways, people can seek out which one suits their fancy. Perhaps, that might have lead to misunderstanding. Now, (I'm not talking about Flipping), if you buy a decent priced home as a primary residence, in a good desirable location and decide to improve it, you will most likely sell at a higher price. Now you won't be taxed up to $500,000 in capital gains if your married due to Home-Sale Tax Exemption. The law applies to sales after May 6, 1997. To claim the whole exclusion, you must have owned and lived in your home as your principal residence an aggregate of at least two of the five years before the sale (this is called the ownership and use test). You can claim the exclusion once every two years. Details are here among many other websites: http://charliedunn.com/_Sellers_Tips/Capital_Gains_Exclusion_for_Homesellers.htm

As far as trolling, I am uncertain what you mean by that. But it does not sound nice. If you see my past posts, they are all given only to exchange ideas & provide insight. That's what forums are about and I would NEVER intentionally give out false info.

Yes, of course seek professional advice but don't make claims on someone else's character... it is uncalled for and you should know better since your a forum moderator on top of it!!  Principal residence and vacation home sellers can avoid federal capital gain tax by careful advance tax planning.

Freda

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Re: How did you get started in Real Estate Investing?
« Reply #17 on: April 26, 2013, 06:44:50 AM »
I paid cash for a rental (foreclosure in the hood), cash/barter for some renovations, plopped a client in it for a couple of years just to cover the operating costs, and am selling it now on short term land contract to one of my employees.  Overall it was about a 3 year investment with a 200% gain.  But it's a very specific set of circumstances.

arebelspy

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Re: How did you get started in Real Estate Investing?
« Reply #18 on: April 26, 2013, 07:15:07 AM »
arebelspy, As far as I know, all the advice I posted is valid.

Well I'm telling you it's not.  And it continues to be wrong, and this is now the third time you have given out incorrect tax advise, despite being corrected.

I did describe three different ways, people can seek out which one suits their fancy. Perhaps, that might have lead to misunderstanding. Now, (I'm not talking about Flipping), if you buy a decent priced home as a primary residence, in a good desirable location and decide to improve it, you will most likely sell at a higher price. Now you won't be taxed up to $500,000 in capital gains if your married due to Home-Sale Tax Exemption. The law applies to sales after May 6, 1997. To claim the whole exclusion, you must have owned and lived in your home as your principal residence an aggregate of at least two of the five years before the sale (this is called the ownership and use test). You can claim the exclusion once every two years. Details are here among many other websites: http://charliedunn.com/_Sellers_Tips/Capital_Gains_Exclusion_for_Homesellers.htm

This is flat out wrong.  It was changed in 2009.

It is prorated now, like I said, so you'd have to have lived in it the whole time to exclude 100% (like you claim you can do by living in it 2 out of 5 years).  If you live in it 2 out of 5 years, you can only save on 40% of the gains.

Stop saying it, stop telling people they can live in a house 2 out of 5 years and not pay any taxes.  It's not true, and it's going to get someone in a lot of trouble with the IRS, or cost them a giant bill they aren't able to pay.

Again everyone: consult a lawyer and/or CPA, don't listen to a random on the internet, including myself.  Cheers!
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

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Re: How did you get started in Real Estate Investing?
« Reply #19 on: April 26, 2013, 10:48:01 PM »
arebelspy, you should follow your own advice & seek a tax professional because you are mistaken. Among many titles I've read and numerous websites that claim the same thing and I knew someone who did it... just to be 100% certain...

Today, I called my tax accountant who is FYI among the best in Hawaii. I repeated what I posted earlier and what you mentioned being prorated to clarify what the facts were and your wrong I am right. Call yours and see for yourself. But I am right.

An apology would be nice but not necessary, since I am not ego driven but should be rightfully redeemed. You can now remove every previous comment where you state I am wrong and write I am right! =0)

Cheers!

arebelspy

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Re: How did you get started in Real Estate Investing?
« Reply #20 on: April 26, 2013, 11:52:15 PM »
arebelspy, you should follow your own advice & seek a tax professional because you are mistaken. Among many titles I've read and numerous websites that claim the same thing and I knew someone who did it... just to be 100% certain...

Plenty of books and websites say that because they're out of date.

And if you know someone who did it, they either did it before the law changed in 2009, or they did it after and better hope they aren't audited.  Plenty of people do stuff wrong on their taxes.

Here's a more up to date citation for you.  From this site: www.groco.com/readingroom/real_helpforhomeowners.aspx
Quote
“Non Qualified Use” Provision
There is another new provision in a bill passed by Congress that will take effect January 1, 2009 that you need to know about. This involves rental properties that revert back to owner-occupied properties.

Old Rule: Rental > Owner-Occupied > Live in 2 out of 5 years > Sell and get $250,000 capital gains tax free if single, $500,000 if married.

New Rule: Rental (let’s say for 3 years) > Owner-Occupied > Live 2 out of 5 years > Sell – now the government says the 3 years of rental were “non-qualified” use so you will only get credit for the years that were owner occupied, or in this example: 2/5th of the gain is tax free. There is a formula: the top number is the amount of time it was owner-occupied and the bottom number is the time of total ownership of the property, this fraction then determines the amount of tax free gain and the balance that will be taxable up to the $250,000 or $500,000 limit.

Why is this important? If you own a rental or plan to buy one and then plan to revert it back to a principal residence at some point in time, you need to be aware that you will not be getting 100% of the taxable gain credit up to the $250,000 or $500,000 limit. You will only be entitled to a portion of it tax free, with the balance being taxed. Have a CPA help you with this if you are thinking of doing this or are in this situation.

That was just the first google hit.  I'm sure there's more.

Please post your CPA's phone number, or PM it to me if you don't want to publicly post it.  I'll be glad to give him/her a call.  Sounds like they should keep up with the tax laws as well.  Being four years out of date is quite dangerous.  I'd suggest a new CPA.

EDIT: I went ahead and dug up the IRS publication for you.  It's clear as day under "non qualified use" www.irs.gov/publications/p523/ar02.html#en_US_2012_publink1000240774

You are not right, and stop spreading this wrong tax information.  Thanks for your cooperation.
« Last Edit: April 26, 2013, 11:56:42 PM by arebelspy »
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

Joel

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Re: How did you get started in Real Estate Investing?
« Reply #21 on: April 27, 2013, 12:02:38 AM »
Nonqualified Use


Gain from the sale or exchange of the main home is not excludable from income if it is allocable to periods of nonqualified use. Nonqualified use means any period in 2009 or later where neither you nor your spouse (or your former spouse) used the property as a main home, with certain exceptions (see next).

Exceptions.   A period of nonqualified use does not include:
1.
Any portion of the 5-year period ending on the date of the sale or exchange after the last date you (or your spouse) use the property as a main home;

2.
Any period (not to exceed an aggregate period of 10 years) during which you (or your spouse) are serving on qualified official extended duty:

a.
As a member of the uniformed services;

b.
As a member of the Foreign Service of the United States; or

c.
As an employee of the intelligence community; and


3.
Any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the IRS.



Calculation.   To figure the portion of the gain allocated to the period of nonqualified use, multiply the gain by the following fraction:
 

  Total nonqualified use during the period of ownership in 2009 or later   
  Total period of ownership   

  This calculation can be found in Worksheet 2, line 10, later in this publication.
  For examples of this calculation, see Business Use or Rental of Home , below. [/quote]

See Publication 523:
http://www.irs.gov/uac/Publication-523,-Selling-Your-Home-1
CTRL + F "Nonqualified Use"

It has its own section.

Dianas Report - you are wrong. You might want to look for a new CPA, or a new state if he is Hawaii's best.
« Last Edit: April 27, 2013, 12:32:36 AM by Joel »

Dianas Report

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Re: How did you get started in Real Estate Investing?
« Reply #22 on: April 27, 2013, 12:30:32 AM »
Ok, thanks for posting Publication 523. I guess an apology from me will have to do because I was certain that info was correct and it wasn't. Sorry to aresbelspy, hurricane0884 & other readers. I honestly had good intentions to share info but I was mistaken. Although I dislike arguments, I'm glad to have the correct info now.

arebelspy

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Re: How did you get started in Real Estate Investing?
« Reply #23 on: April 27, 2013, 07:57:22 AM »
Thanks Dianas. 

Glad we got it straightened out.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

Undecided

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Re: How did you get started in Real Estate Investing?
« Reply #24 on: August 22, 2013, 06:00:35 PM »
I know this is an old thread, but I came across it while searching on IRA issues and thought it worthwhile to point out that neither of the simplified versions of the capital gains exclusion presented was correct (or "complete" might be better), despite Joel posting the relevant text, in case someone else digs it up and gets the wrong impression. The hypothetical that Dianas Report actually proposed (of making the house a primary residence for two years and then renting it out for three years) would be an entirely qualified use, although doing it in the other order (renting it for three years and then making it your primary residence) would mean having three years of non-qualified use. That order matters under the first exception described in pub. 523.