Investing 102 - Lateral-g Forums

**GregWeld** · #1 10-28-2017, 07:13 PM

RE: Inheriting depreciated rental property

You will not need to worry about past depreciation on your inherited property. You will just use your stepped up basis (FMV of property on date of inheritance) and this new basis will be used for depreciation. You will be able to depreciation these inherited assets in full over the property's useful life. For example, use the full 27.5 year, S/L for the rental house (less land) and the start date will be the date when the rental property was transferred to you.

For any prior capital improvements, these will be included in the stepped up basis on the inherited property so do not depreciate them separately.

For any appliances, since they are considered "new" to you, you will just use the new FMV of these items and depreciate them over the new useful life at the date the asset were transferred to you.

SSLance · #2 10-29-2017, 02:15 PM

Quote:

Originally Posted by GregWeld

RE: Inheriting depreciated rental property

You will not need to worry about past depreciation on your inherited property. You will just use your stepped up basis (FMV of property on date of inheritance) and this new basis will be used for depreciation. You will be able to depreciation these inherited assets in full over the property's useful life. For example, use the full 27.5 year, S/L for the rental house (less land) and the start date will be the date when the rental property was transferred to you.

For any prior capital improvements, these will be included in the stepped up basis on the inherited property so do not depreciate them separately.

For any appliances, since they are considered "new" to you, you will just use the new FMV of these items and depreciate them over the new useful life at the date the asset were transferred to you.

Yep, that's what I thought...death accelerates basis...

**GregWeld** · #3 10-29-2017, 08:52 PM

There are MANY ways to invest in rental real estate....

I, for one, have ZERO interest in managing a rental. I don't want to know about the water heater that quit working on Sunday afternoon.

I invest in LLC's that buy larger commercial apartment complexes - they do all the management.... I collect a check every 6 months for my shares. The last one I invested in ($900K) pays me $60K a year... I get the offsetting depreciation just as I would if I owned it personally.... and we recapture the depreciation upon the sale of the property (again, just like you would on any rental).

I got a statement with the last "dividend" check --- showing the value of my investment is over $1.9MM now. The rental market in the Seattle area has been ON FIRE.... and as such (after an extensive remodel of the property) they've been able to substantially increase the rents.

Just throwing this out there for those - that like me - have no interest in managing a rental. There are many firms in every area of the country that do this kind of income property management. You just have to ask your attorney or accountant.... They'll know someone.

Typically a share goes for somewhere between $50K and 100K per share. Sometimes they'll sell a half share. You do have to be an "accredited investor" to invest in this type of deal -- they're totally illiquid -- and you have zero control of when the property is sold.... so your money may be invested for a very long time (as in YEARS) and there's nothing you can do about it. So like any investment -- it should be a small percentage of your investable dollars. Remember the 5% rule!!

**GregWeld** · #4 11-08-2017, 06:36 AM

End of year reminder folks!

Don't forget to review your accounts

Before you decide to SELL ---- make sure you check to see if you're close to collecting a dividend? Do you have profits to take that the sale will offset (for taxes).

Do you have outsized gain(s) that you want to offset losses with? If so -- make sure you check - are they long term gains (one year and one day ownership) or short term etc.

This IS NOT a list of all of the thought process --- it's simply a reminder to look at your accounts -- think about TAXES -- and IF you are going to do some balancing -- there are things to think about!

In other words ---- don't just indiscriminately punch the Buy or Sell button without thinking it thru.

Vegas69 · #5 11-11-2017, 04:12 PM

It doesn't appear that the Great Recession less than 10 years ago changed the behavior of many citizens. Housing debt is a little lower, but other debts/overall debts are actually higher than 2008. With interest rates still so low, you have to wonder how close we are to the end of the short term debt cycle.

When consumers run out of available income for credit, spending decreases. Remember, a majority of the money exchanged for homes, cars, college, etc. is with DEBT not cash. With interest rates near zero, that card has been played to spur spending since 2010ish. Will we see some inflation before things taper off?

I can tell you that $0 down loans and similar products to stated income are back in the housing market already. I've seen many around me take on new cars, boats, RV's, etc. over the last few years. All financed of course.

As usual, time will be the best teacher.

Vegas69 · #6 11-11-2017, 04:36 PM

My search varied some, but up to 78% of Americans live paycheck to paycheck or damn close to it.

**WSSix** · #7 11-12-2017, 05:37 AM

I've been hearing people talk about us being in another bubble and that it's only a matter of time before it pops. I'm not surprised people are taking on more debt that they should. We're a very materialistic society. I won't get into that trap. I'm sure someone could show me how I can leverage the cheap lending situation to make more money for myself, but I'm not interested in putting myself at that much risk.