Real Estate Issue
- Thread starter grailmail
- Start date
negativefcf
New member
- Jun 18, 2026
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Randall Wrote:
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> Let me get this straight, you don't want to rent
> because the tenants are a pia. Property
> management is out of the question for some reason
> unbeknownst to us. You don't want to sell because
> you may move back in 3 or 4 years. The rent you
> were making didn't cover the cost of the mortgage,
> and now that you're gonna stop renting it out this
> summer, you're wondering how you'll cover the
> costs of the mortgage.
>
> You have two options
>
> 1- Bordello
> 2- Turn it into a funhouse, I've always felt there
> was a lack of funhouses out there
I am not "wondering" how I would cover the cost of the mortgage. I have that covered. My original question was around tax implication. Somehow this trend got waaayy off-topic.
-------------------------------------------------------
> Let me get this straight, you don't want to rent
> because the tenants are a pia. Property
> management is out of the question for some reason
> unbeknownst to us. You don't want to sell because
> you may move back in 3 or 4 years. The rent you
> were making didn't cover the cost of the mortgage,
> and now that you're gonna stop renting it out this
> summer, you're wondering how you'll cover the
> costs of the mortgage.
>
> You have two options
>
> 1- Bordello
> 2- Turn it into a funhouse, I've always felt there
> was a lack of funhouses out there
I am not "wondering" how I would cover the cost of the mortgage. I have that covered. My original question was around tax implication. Somehow this trend got waaayy off-topic.
nolabird032
New member
- Jun 18, 2026
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i'm mostly on the L1 board... but i read all the GD threads and pop in my $.02 when there is something interesting/funny goin on... this has been one of my favorites!
i dont know a lot about real estate, so i didnt butt into the convo. i do know that i'm getting 4.5% on my orange savings account.
seems to me, this is a question that should be posted on a CPA msg board.
i dont know a lot about real estate, so i didnt butt into the convo. i do know that i'm getting 4.5% on my orange savings account.
seems to me, this is a question that should be posted on a CPA msg board.
negativefcf Wrote:
-------------------------------------------------------
> your interest expense
> calculation is wrong (its an amortizing loan, not
> an IO loan), its off by $5K-$6K.
You stated earlier you had an LV of 500M @ 6%. if that is your LV than my interest calculation was off by about $300.00. If the original loan you took out was 500M and it is now less than that than 500M is no longer your loan value.
> My decision NOT to sell is also personal. A. I
> dont want to take a capital gain
Depending upon when you purchased this house and whether you ever lived there you may not have any capital gains. This is a limited time benefit and if you don't make the decison to sell for 3-4 years and do not return to live there as your primary residence I don't see how you would still qualify for this tax benefit (you might at this time).
> in 3-4 years that I want that exact same house and
> probably would have to fork over some more money.
> I am willing to pay for the "carrying cost" for
> the luxury of having the option to make it my
> primary residence in the future.
B.
> Diversification - My bonus/package will likely be
> dependent on the performance of the stock market.
> My 401K/IRA is also 100% equity. My exposure to
> the equity market (directly and indirectly) is
> huge. The property in California fits the bill in
> terms of diversification. Like I said before, its
> financed with excess cash, and I am not
> particularly worried about liquidity needs.
-------------------------------------------------------
> your interest expense
> calculation is wrong (its an amortizing loan, not
> an IO loan), its off by $5K-$6K.
You stated earlier you had an LV of 500M @ 6%. if that is your LV than my interest calculation was off by about $300.00. If the original loan you took out was 500M and it is now less than that than 500M is no longer your loan value.
> My decision NOT to sell is also personal. A. I
> dont want to take a capital gain
Depending upon when you purchased this house and whether you ever lived there you may not have any capital gains. This is a limited time benefit and if you don't make the decison to sell for 3-4 years and do not return to live there as your primary residence I don't see how you would still qualify for this tax benefit (you might at this time).
> in 3-4 years that I want that exact same house and
> probably would have to fork over some more money.
> I am willing to pay for the "carrying cost" for
> the luxury of having the option to make it my
> primary residence in the future.
B.
> Diversification - My bonus/package will likely be
> dependent on the performance of the stock market.
> My 401K/IRA is also 100% equity. My exposure to
> the equity market (directly and indirectly) is
> huge. The property in California fits the bill in
> terms of diversification. Like I said before, its
> financed with excess cash, and I am not
> particularly worried about liquidity needs.
negativefcf Wrote:
-------------------------------------------------------
> your interest expense
> calculation is wrong (its an amortizing loan, not
> an IO loan), its off by $5K-$6K.
You stated earlier you had an LV of 500M @ 6%. if that is your LV than my interest calculation was off by about $170.00. If the original loan you took out was 500M and it is now less than that, than 500M is no longer your loan value.
Yr 1 Balance 500M
Pmt 2997.75
Balance after 1 yr 493859.94
Total pmts 35,973 - 6140.05 (reduction in prin 500000-493859.94)=29832.50
> My decision NOT to sell is also personal. A. I
> dont want to take a capital gain
Depending upon when you purchased this house and whether you ever lived there you may not have any capital gains. This is a limited time benefit and if you don't make the decison to sell for 3-4 years and do not return to live there as your primary residence I don't see how you would still qualify for this tax benefit (you might at this time).
> in 3-4 years that I want that exact same house and
> probably would have to fork over some more money.
> I am willing to pay for the "carrying cost" for
> the luxury of having the option to make it my
> primary residence in the future.
This has nothing to do with finances so I will not respond to it.
B.
> Diversification - My bonus/package will likely be
> dependent on the performance of the stock market.
> My 401K/IRA is also 100% equity. My exposure to
> the equity market (directly and indirectly) is
> huge. The property in California fits the bill in
> terms of diversification. Like I said before, its
> financed with excess cash, and I am not
> particularly worried about liquidity needs.
There are plenty of ways to diversify without investing in a property that you are losing more than 25M/year on. Also, because of the lack of cap gains treatment a good case can be made for holding other than equities in your 401-K.
As I stated earlier, consult a CPA.
-------------------------------------------------------
> your interest expense
> calculation is wrong (its an amortizing loan, not
> an IO loan), its off by $5K-$6K.
You stated earlier you had an LV of 500M @ 6%. if that is your LV than my interest calculation was off by about $170.00. If the original loan you took out was 500M and it is now less than that, than 500M is no longer your loan value.
Yr 1 Balance 500M
Pmt 2997.75
Balance after 1 yr 493859.94
Total pmts 35,973 - 6140.05 (reduction in prin 500000-493859.94)=29832.50
> My decision NOT to sell is also personal. A. I
> dont want to take a capital gain
Depending upon when you purchased this house and whether you ever lived there you may not have any capital gains. This is a limited time benefit and if you don't make the decison to sell for 3-4 years and do not return to live there as your primary residence I don't see how you would still qualify for this tax benefit (you might at this time).
> in 3-4 years that I want that exact same house and
> probably would have to fork over some more money.
> I am willing to pay for the "carrying cost" for
> the luxury of having the option to make it my
> primary residence in the future.
This has nothing to do with finances so I will not respond to it.
B.
> Diversification - My bonus/package will likely be
> dependent on the performance of the stock market.
> My 401K/IRA is also 100% equity. My exposure to
> the equity market (directly and indirectly) is
> huge. The property in California fits the bill in
> terms of diversification. Like I said before, its
> financed with excess cash, and I am not
> particularly worried about liquidity needs.
There are plenty of ways to diversify without investing in a property that you are losing more than 25M/year on. Also, because of the lack of cap gains treatment a good case can be made for holding other than equities in your 401-K.
As I stated earlier, consult a CPA.
negativefcf
New member
- Jun 18, 2026
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- 0
> Yr 1 Balance 500M
> Pmt 2997.75
> Balance after 1 yr 493859.94
> Total pmts 35,973 - 6140.05 (reduction in prin
> 500000-493859.94)=29832.50
- The "Principal reduction" is still a cash cost. For this analysis, I am not concerned about equity accretion. I am more concernced about cash outflow.
> There are plenty of ways to diversify without
> investing in a property that you are losing more
> than 25M/year on. Also, because of the lack of cap
> gains treatment a good case can be made for
> holding other than equities in your 401-K.
There are NOT plenty of ways to diversify. In the investment universe, how many options do you have for inflation-protected (sp?) investment? Very Few. Equity, Real Estate, perhaps emerging markets. If you know of any investment that is yielding more than money market rate of 4-5%. let me know!
> Pmt 2997.75
> Balance after 1 yr 493859.94
> Total pmts 35,973 - 6140.05 (reduction in prin
> 500000-493859.94)=29832.50
- The "Principal reduction" is still a cash cost. For this analysis, I am not concerned about equity accretion. I am more concernced about cash outflow.
> There are plenty of ways to diversify without
> investing in a property that you are losing more
> than 25M/year on. Also, because of the lack of cap
> gains treatment a good case can be made for
> holding other than equities in your 401-K.
There are NOT plenty of ways to diversify. In the investment universe, how many options do you have for inflation-protected (sp?) investment? Very Few. Equity, Real Estate, perhaps emerging markets. If you know of any investment that is yielding more than money market rate of 4-5%. let me know!
nolabird032
New member
- Jun 18, 2026
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the national average for CD rates is 5.14% (you could lock into 5.17% for 10 years if this website is accurate)
even more then that... HSBC's savings account rate is 6% right now
http://www.money-rates.com/cdrates.htm
Edited 2 time(s). Last edit at Friday, April 13, 2007 at 10:27AM by nolabird032.
even more then that... HSBC's savings account rate is 6% right now
http://www.money-rates.com/cdrates.htm
Edited 2 time(s). Last edit at Friday, April 13, 2007 at 10:27AM by nolabird032.
virginCFAhooker
New member
- Jun 18, 2026
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- 0
I was doing some research on some banks. I always suspected this but the research i picked up on the side while listening to conference calls verified it: Lots of banks offer high teaser rates to get you to deposit your money (whether it's cash or cd) and then the rates change drastically. Depositors tend not to move their money out afterwards. In fact, most depositors do not shop their money for cash rates very frequently, only when new money comes into their hands do they shop, but they are crazy not to because cash rates are all over the place and it's getting really easy/cheap to move money these days.
nolabird032
New member
- Jun 18, 2026
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- 0
how can they change the rates on a CD? i've seen some that were callable by the bank, but if you buy into that, you know what you're in for. am i missing something?
the rate on a CD is locked in for the duration. That's the definition of a CD. In return for that lock you lose much of the interest if you close the CD early. The best CD rates tend to come from smaller banks that need the deposits. Big commercial banks have enough checking and money market deposits that they don't need to pay big rates to attract hot money. The bigger the bank, the more likely it is that the high rates are only going to longstanding customers (i.e. not advertised).
With money markets, 90 or 180 day teasers are common. There are huge flows in and out of banks depending on who's got the best teaser rate - plenty of people shop for the best rates. However, there are also many folks who never notice - such as those who let their cash balances in their brokerage accounts earn 1%, while the brokerage firm makes an easy 5% on the money.
With money markets, 90 or 180 day teasers are common. There are huge flows in and out of banks depending on who's got the best teaser rate - plenty of people shop for the best rates. However, there are also many folks who never notice - such as those who let their cash balances in their brokerage accounts earn 1%, while the brokerage firm makes an easy 5% on the money.
negativefcf Wrote:
> - The "Principal reduction" is still a cash cost.
> For this analysis, I am not concerned about equity
> accretion. I am more concernced about cash
> outflow.
If you are using the home as a 2nd home there is no tax deduction for principal reduction. The pre tax cash flow on the expense side would be the same either way - whether someone is paying you rent or whether you are paying the mortgage without the financial benefit of any rent you still have to pay the principal amount on the loan you have.
> There are NOT plenty of ways to diversify. In the
> investment universe, how many options do you have
> for inflation-protected (sp?) investment? Very
> Few. Equity, Real Estate, perhaps emerging
> markets. If you know of any investment that is
> yielding more than money market rate of 4-5%. let
> me know!
There are plenty of ways to achieve a 6%+ return over the time period you are looking for without using equities. Talk to someone in your area knowledgeable about investments for help.
Keep in mind, I don't have any interest in whether you keep the house or not. You asked for info and I gave you some. Good luck with whatever decision you make. Two final comments
1)what I have seen is that when people make financial decisions emotionally, they usually regret it.
2)talk to a cpa
> - The "Principal reduction" is still a cash cost.
> For this analysis, I am not concerned about equity
> accretion. I am more concernced about cash
> outflow.
If you are using the home as a 2nd home there is no tax deduction for principal reduction. The pre tax cash flow on the expense side would be the same either way - whether someone is paying you rent or whether you are paying the mortgage without the financial benefit of any rent you still have to pay the principal amount on the loan you have.
> There are NOT plenty of ways to diversify. In the
> investment universe, how many options do you have
> for inflation-protected (sp?) investment? Very
> Few. Equity, Real Estate, perhaps emerging
> markets. If you know of any investment that is
> yielding more than money market rate of 4-5%. let
> me know!
There are plenty of ways to achieve a 6%+ return over the time period you are looking for without using equities. Talk to someone in your area knowledgeable about investments for help.
Keep in mind, I don't have any interest in whether you keep the house or not. You asked for info and I gave you some. Good luck with whatever decision you make. Two final comments
1)what I have seen is that when people make financial decisions emotionally, they usually regret it.
2)talk to a cpa