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What do I do?

I dont do anything these days.

Most FReepers know that I used to fly for the Navy then for Delta, but since then I have been buying up houses in the San Diego area and renting them out, letting my tenants pay the mortgages while I get all the deductions. I own 6 homes and am working on 2 more.

The trick, is not to flip homes, but to combine equity and tax breaks to profit from being in debt. You see, if I get enough rent to pay positive cash flow towards the mortgage + the cost of the annual property tax, that's great. But, if I don't get enough rent, since my properties are held by a holding company that I created, it would be a net loss, right? Well guess what? Business losses are......tax deductible! So, it doesn't really matter if I cant find someone to pay enough rent to cover me. I win either way.

When I get enough cash over debt, I refinance the property to put myself more into debt, while pocketing enough to finance the purchase of MORE property (or a bass boat)courtesy of current tax laws.

Look at it this way: If interest rates go up, I get more of a tax deduction from the payments. If they go down, I can afford more property to be in debt on, so I get a bigger deduction again. I pay for gardening and landscaping on my properties to keep them attractive, and my other business expense is a full time handyman keeping the properties in perfect condition for sale or appraisal.

I get no income from this, but should the market turn downwards, I can sell the properties, close the business and pocket all the money from the sales.

That is a simplified explanation, but the key is to not be afraid to use your money to make more money. If I were you,(Can I say that here?) I would make sure that my family was living as close to the vest as possible, so that I could put aside at least 20% of my net income. You would be amazed at what Banks are willing to loan you, if you don't really need the money. You don't go out and buy the biggest house, you go out and find the one most likely to grow in value based on location, neighbors and condition.

It is a very dry subject, so most people don't like to read up on tax laws, debt and other things like this. But if you do, you will be ahead of the game.

But, reality is that bad things happen, so you still need to have that nest-egg available should things go badly. SAVE YOUR MONEY. Then, when the time is right, use it to make more.

Thank you for your openness.

As I said, I live in rural southwest Missouri. I found out the other day that 33% of the the residents in my county live below the pover(y level. Not exactly a thriving rental market.

I'm not trying to delve too deep into your personal portfolio, but if you are willing to discuss it....

Have you ever calculated your actual net worth? Assets vs. liabilities? At age 28, we are currently at approximately $107,000 actual worth. (We owe $70,000 on a $150,000 property. Two used, paid for cars worth $8,000 and $20,000 in the bank)

Have you calculated your actual APR on what you are earning on the properties? I know that it becomes quite intricate when you factor appreciation, interest rates, tax deductions, etc. Your accountant probably does quite a bit more than ours does, but then again that is what you pay him for.

I'm asking out of genuine curiosity. At my age, I'm still learning all the amazing opportunities that exists in this amazing country of ours.

thanks

One question...Well guess what? Business losses are......tax deductible! So, it doesn't really matter if I cant find someone to pay enough rent to cover me. I win either way.

A $10,000 business loss translates into an approximately $2,000 tax deduction depending on your tax rates, correct? It appears that this would leave you 8 grand in the whole as you took a $10k hit to avoid $2k in taxes.

I'm currently paying approximately $4700 in interest resulting in a possible tax deduction of $1170.00 at a 25% tax rate. I can't see the reasoning behind paying $4600 in taxes to avoid paying $1200 in taxes.

I'm always willing to learn, so any info you are willing to submit will be greatly appreciated. I plan to be quite wealthy when I retire..not because I did something great, but becuase I did it right for a very large portion of my life. I'm always interested in learning from folks who have been there and done that.

thanks.