Generally, in an inflationary market the market rents tend
to be less than adequate to maintain a positive cash flow,
or about 0.5% of market value per month. In a level market
with no appreciation potential, market rent provides
positive cash flow, or about 1% of market value per month.

There are logical reasons for this. Renters cannot afford
1% rents of inflated value homes, and owners willingly forgo
cash flow due to the anticipated gains. Conversely in a
stable, uindervalued market the owner is unwilling to own
with inadequate cash flow and renters can afford the 1% on a
depressed market value.

ed

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jwilder987[at]yahoo.com wrote:

- quote -

I don't know. Are you depreciating your house?

In two months your house has appreciated 28%. If you can
find another investment that can appreciate 28% in 2 months,
I wouldn't keep that house.

- quote -

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"jwilder987[at]yahoo.com" <jwilder987[at]yahoo.com> wrote:

- quote -

Well, for one thing the value of the property has gone up
more than ten times the amount of your negative cash flow.
If you made a 20% down payment that's about a 135% return on
your investment.

If the property is likely to continue to increase value at
that rate - or even half that rate - it's probably a better
return than you will get anywhere else, even with the
negative cash - most of which is deductible, by the way.

You really need to talk to your own financial planner to
determine your specific financial situation to see if you
should keep or sell this property.

Stu

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jwilder987[at]yahoo.com wrote:

- quote -

You tell us. This is a tax board, not a real estate
investment board.

- quote -

Except for gain equal to depreciation allowed or allowable
which will be taxed at 25%.

Good luck.

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<jwilder987[at]yahoo.com> wrote:

- quote -

Most importantly, whether you want to keep or sell the
property is a business decision, not a tax decision. If you
think that's all the appreciation you're going to get for
the foreseeable future and/or think that future appreciation
is not going to offset the downsides of owning the property
(e.g., negative cashflow, risks of ownership, etc.), then
sell it. However, if the property is in a rapidly
appreciating area and has the potential to increase another
$XXX thousand in the next year then it may be worth it to
keep the property. You should never look at investments
solely from a tax perspective. Also, there are other
factors to consider from a tax perspective that you haven't
even touched in your questions above. For example, is the
property throwing off tax losses (probably yes, but it's NOT
the $6k you mention above) and are those losses useful for
reducing your income from other sources for tax purposes?

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jwilder987[at]yahoo.com posted:

- quote -

Many people who invest in residential real estate do it for
just that reason: they can deduct the "loss" (which is
compounded by depreciation) against their high ordinary
incomes.

- quote -

Yes.

Actually, I surprised you got this far down the road without
obtaining some knowledge about the tax implications of
investing in residential real estate. Please "get thee to a
taxeree" ASAP. [How's that for a CPA/EA/tax specialist
referral?]

At least, obtain IRS Pub 527, for a primer on residential
real estate investments and tax implications.

Bill

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jwilder987[at]yahoo.com wrote:

- quote -

Let's see -- appreciation in one year of $70,000 (28%), net
appreciation of $63,000 (25+%). You want egg in your beer,
too?

- quote -

That would be the maximum rate charged, some of the gain may
be at the lower 5% rate, depending on your other income.

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I purchased a house for investment in February 2006. I am
negative cash flow $500/month based on the rent I receive
over all expenses. This is $6,000 per year I'm negative. I
purchased the house for $250,000 and it just appraised for
$320,000. So I have $70,000 in appreciation.

Is there any logical reason to keep a house that is so
negative? The way I see it I am eating into my appreciation
$6,000 per year.

If I sell the investment property after 366 days, will it be
a flat 15% long term cap gains tax?

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