August was expensive. Most of the large expenses were move-related: starting new utilities required hefty deposits, and I spent quite a bit on gas to get everything down here.
On the business side, I spent over $3,000 repairing my rental properties. Most of this was because I was getting three of the properties ready for new tenants, but I did have an almost $600 air conditioning repair.
August Personal Expenses ($3,760)
$846 Auto ($180 for insurance, $46 for service, $552 for fuel)
$0 Bank Fees
$6 Clothing
$139 Entertainment (movies, gambling, alcohol)
$324 Food
$0 Gifts Given
$6 Clothing
$139 Entertainment (movies, gambling, alcohol)
$324 Food
$0 Gifts Given
$934 Household/Housing/Home Repair
$0 Homeowner's Association Dues
$0 Homeowner's Association Dues
$139 Health and Dental Insurance
$0 Homeowner's Insurance (paid annually each June)
$0 Medical
$0 Miscellaneous
$374 Mortgage Interest (primary residence)
$0 Personal Care
$0 Homeowner's Insurance (paid annually each June)
$0 Medical
$0 Miscellaneous
$374 Mortgage Interest (primary residence)
$0 Personal Care
$0 Subscriptions
$98 Taxes
$98 Taxes
$883 Utilities
$18 Vacation
August Business Expenses ($3,999)
$734 Mortgage Interest (rental properties)
$180 Interest on Debt (not including Mortgage Interest)
$3,085 Rental Properties - Maintenance and Repairs
Total August Expenses : $7,759
Notes
$18 Vacation
August Business Expenses ($3,999)
$734 Mortgage Interest (rental properties)
$180 Interest on Debt (not including Mortgage Interest)
$3,085 Rental Properties - Maintenance and Repairs
Total August Expenses : $7,759
Notes
- Nothing more to say - just hope expenses will be lower moving forward!!!
As someone that is considering becoming a landlord in the future I have a question: How is rental income taxed? I get the impression a lot of landlords are applying it to mortgage/taxes/insurance and only reporting the surplus as income if at all.
ReplyDeleteI did a quick search and found an IRS page that said rental income should be counted as gross... Whats the deal?
I haven't heard of anyone doing that. Depreciation expense alone negates the need to take chances like that. Most of my properties are barely profitable after depreciation, which is a non cash expense that will not affect me unless I sell my properties.
DeleteDepreciation expenses?
ReplyDeleteI was under the impression that most property (sans bubble) appreciated slightly each year. Even if it cost 1-4% a year in maintenance.
Also how did you buy a new house with 400,000+ in debt? Are your rental property's held by a company or something?
You take depreciation as a non-cash expense even though, as you correctly assume, most real estate appreciates over time. When I buy a house, I don't get to deduct the whole cost of the house as an expense the year I bought it. Instead, I have to depreciate it.
DeleteWhen you buy a house for investment purposes, the purchase price less the value of the land it sits on gets depreciated over 27.5 years. For example, if the house (less land) was bought for $100,000, every year I would depreciate $3,636 ($100,000/27.5) for 27 and 1/2 years. In essence, the first $3,636 in rent I collect every year is offset by this non-cash expense. Now, if I sell the house, I realize a gain on the sale based on the price I sold it for, minus the amount I have yet to depreciate. So if I sell the house after 3 years for $110,000, my gain is not $10,000. My gain is $10,000 + $3,636*3 years ($10,908), or $20,908. So, if I sell the house I have to pay taxes on the $20,908.
Your best bet for tax purposes is to never sell the house. There is a way to sell the house and still not have to pay taxes (called a like-kind exchange), but I've never done that so I won't try to explain it.
Regarding my debt... Two of my properties are held by a company; the other 9 are in my name. Nearly all of that debt was created from buying all these houses. That debt includes traditional mortgages, a HELOC, credit card convenience checks (yes, I've bought houses with credit cards), and personal loans from acquaintances.