Opinions requested regarding SoWal real estate pricing...

[fisher]

Fisher,

Thanks for your two bit advice; but I have great lawyer, a great CPA, and awesome broker. Maybe you do not know as much as you claim to. My only advice on this board is to get advice from a professional.


FYI, see below.


If you or your spouse actively participated in a passive rental real estate activity, you can deduct up to $25,000 of loss from the activity from your nonpassive income. This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. Similarly, you can offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception.

If you are married, filing a separate return, and lived apart from your spouse for the entire tax year, your special allowance cannot be more than $12,500. If you lived with your spouse at any time during the year and are filing a separate return, you cannot use the special allowance to reduce your nonpassive income or tax on nonpassive income.

The maximum special allowance is reduced if your modified adjusted gross income exceeds certain amounts. See Phaseout rule, later.

Example ? Deducting Passive Income and Losses
Kate, a single taxpayer, has $70,000 in wages, $15,000 income from a limited partnership, a $26,000 loss from rental real estate activities in which she actively participated, and less than $100,000 of modified adjusted gross income. She can use $15,000 of her $26,000 loss to offset her $15,000 passive income from the partnership. She actively participated in her rental real estate activities, so she can use the remaining $11,000 rental real estate loss to offset $11,000 of her nonpassive income (wages).

The key in your quote is actively participated in the passive rental income activity. In my example, I mention using a real estate manager to handle the renting of my property. In that case, the losses are not allowed. If in your example, you are totally mananging the rental property activity and not using an agent, then you can deduct up to $25k. If you use a management company to handle your rentals as the majority of folks do, then you do not qualify for the exemption.

 

[Chickpea]

:roll: I'm living out my lifelong dream of relocating my family here from Tx June 1st and am working through the pros and cons of the current market conditions. I'd love to hear from some of you regarding an objective view of pricing. I'll admit my mindset has become very jaded due to a number of factors. Side note: If you live in Rosemary Beach, don't even bother reading further, you are either retired, independently wealthy, or mortgaged out the wazoo and this lengthy post will bore you.

I'll preface this by saying I don't think I've ever seen so many real estate agents in one particular locale than I've seen here. And with all due respect, I don't expect any one of them to voice anything but optimism about how pricing and demand is right on the verge of taking off. (I'm very skeptical due to the fact that I read that there are over 11,000 listings right now along the Emerald Coast - supply is considerably higher than demand.)

I want someone to tell me what they would tell their son, friend, or business aquaintance they would do, if they were in my shoes. Not try to sell me on the area, just talk honestly about how to get the best value for my housing dollar.

That being said, I think that I am a great prospect for a home purchase. My income is above average, my credit excellent, and my job allows me to live anywhere along the Panhandle. My preference is to live as close to water as possible (and know that waterfront is out of the question). I don't want to have to drive across the causeway or Mid-bay bridge to get to the beach. Bluewater Bay is nice, but not my cup of tea.

However, it now seems that every mudhole with a trailer in this area has been listed at $300K. And I've been coming down here for 40+ years and I've never seen that kind of seller optimism. The number of homes in the $300K to $400K range is disappointing. And my view is that if I'm going to spend $500K for a 3 bedroom 2+ bath home here, I'll definitely build what I want, not buy a 70's home that somebody is trying to flip for a big profit because their agent has convinced them they can get it.

Am I the only guy in the grit eating world that thinks that a price correction is still yet to come? I understand that there is a lot of money coming into this area, but with homeowner's coverage and property taxes rising, I've got to believe that there are a number of folks in Atlanta, Bham, Memphis, etc, who have overextended themselves. If your taxes and insurance are $700/month, that can seriously impact your monthly mortgage note (escrow).

Am I nuts in my thinking? Is this California? I hope this area has not become unaffordable for the average family fortunate enough to live in this incredibly beautiful area. I'm seriously considering renting for a year to watch and wait. I'd love to hear what you would do if you were in my shoes. Thanks for allowing me to type this novel.

Beach Dad,
I have read this thread with interest as we were in the exact situation you were in about 3 years ago. The parallels are very similar.
Before I share our story I can tell you that I lean on the optimistic side of life and agree with Indigo Jill and SJoe's arguments AND I will also add that we are VERY fiscally conservative.
We rented for a year here because when we moved here we were alarmed at the asking prices - we then proceeded to watch prices escalate and escalate.... we finally decided to buy when we made the decision that Sowal was where we wanted to live. So we bought in Jan 2006! To many people this was probably a foolish decision - to us, we have no regrets although we have certainly not seen double digit appreciation (nor have we seen the value tumble). What drove our decision principally was that we loved the area, our kids (6 and 2) also love it and we feel we own a bit of paradise. I have never lived in a house where values doubled in a year so in a way I am not spoiled - if we see 5-10% appreciation we will be tickled pink. If our property stagnates and we break even, we will still consider ourselves lucky because we got to live in an awesome place. And if our property plummets, then we will have no choice than to deal with it and hope that we do not lose too much - either way it was a calculated risk and one that we do not regret in any way.
Good luck in your decisions -do arm yourslf with a good realtor and take your time looking and discovering different areas that you would consider buying in - then it is up to you o decide if you want to wait in the hopes that prices fall OR make an offer.
No-one here has a crystal ball despite many people thinking they do. No-one can predict to what degree prices may or may not fall or if they will go up or stay stable - do your research, stay informed and enjoy Sowal regardless of whether you chose to rent or buy!

 

[fisher]

No-one here has a crystal ball despite many people thinking they do. No-one can predict to what degree prices may or may not fall or if they will go up or stay stable - do your research, stay informed and enjoy Sowal regardless of whether you chose to rent or buy!

Agreed.

Beachdad--sorry I had a part in gumming up your thread about renting versus owning with lots of bickering amongst the group.

Whatever your decision, I'm sure you will love the lifestyle in South Walton. Good luck and if you decide to buy, I hope you make a fortune on the investment.

 

[Beach Dad]

Not a problem. Nothing wrong with a little spirited discussion. Hey, we are all passionate about something. I guess the key to debating is to remember to attack issues, not people. And that goes for all of us, particularly on message boards. As I used to tell my sales reps, don't use email (or posts) as a club to beat people over the head. Use discernment in what you say.

As mentioned earlier, I really appreciate the feedback. And I thank all who chose to email me directly and to reply.

Can we all agree that living here is awesome? Think I'll send my friends a postcard with some white sand taped to it.

 

[Bobby J]

Not a problem. Nothing wrong with a little spirited discussion. Hey, we are all passionate about something. I guess the key to debating is to remember to attack issues, not people. And that goes for all of us, particularly on message boards. As I used to tell my sales reps, don't use email (or posts) as a club to beat people over the head. Use discernment in what you say.

As mentioned earlier, I really appreciate the feedback. And I thank all who chose to email me directly and to reply.

Can we all agree that living here is awesome? Think I'll send my friends a postcard with some white sand taped to it.

I agree! Did you see the surf and beach on Saturday!!!! Priceless!!:clap_1:

 

[Babyblue]

Not a problem. Nothing wrong with a little spirited discussion. Hey, we are all passionate about something. I guess the key to debating is to remember to attack issues, not people. And that goes for all of us, particularly on message boards. As I used to tell my sales reps, don't use email (or posts) as a club to beat people over the head. Use discernment in what you say.

As mentioned earlier, I really appreciate the feedback. And I thank all who chose to email me directly and to reply.

Can we all agree that living here is awesome? Think I'll send my friends a postcard with some white sand taped to it.

Send them a picture and they will envy you!

 

[spinDrAtl]

The key in your quote is actively participated in the passive rental income activity. In my example, I mention using a real estate manager to handle the renting of my property. In that case, the losses are not allowed. If in your example, you are totally mananging the rental property activity and not using an agent, then you can deduct up to $25k. If you use a management company to handle your rentals as the majority of folks do, then you do not qualify for the exemption.

Using a management company does not necessarily exclude you from 'actively participating'. Active participation is defined as 500 hours during the year. Many people do a lot of their own rentals, do maintenance, maintain websites, etc. etc. Document your time spent on your rentals and as always, talk to a professional.