Write Off's

[Boozer]

Just curious about this since I know a lot of you are self employed.
I have climbed the latter about as high as I can climb it at my current job and I'm ready to move on. The benefits of working for a large corporation are great with the exception of the biggest benefit of all. The all mighty numbers sittin next to the $ sign on my paycheck. The paychecks just aren't big enough anymore.
With this said I'm a couple weeks away from being a licensed realtor. What kind of stuff do I get write off?
Car payment, gas, lunches, insurance, boat expenses, advertising costs. What else?? I can make a ton of money doing real estate out here but from the looks of it without good write off's a 15,000 dollar comission check turns into like 6,000 after taxes when your self employed.
What can you write off to keep as much of your money as possible?

[totenhosen]

Don't forget to have an "office" in your home. You can probably get away with writing off cell phone and home phone bills, dry-cleaning, you should lease your car for a bigger write-off (depreciation), computer, chairs furniture to furnish your office and the real biggy is mileage you traveled in your car.
I'm in the same boat as you. I was going to take the R/E exam last week but ended up having to get my knee reconstructed. I've alsop got a company that will let my work part-time to see if if is really all worth it before I leave a steady pay-check w/ benefits.
[ June 03, 2003, 04:07 PM: Message edited by: totenhosen ]

[jlnorthrup122]

If you move to Las Vegas you could write off hooker expences as client entertaiment :D

[SoCalOffshore]

For all the people that go into real estate now, only 3 to 5 out of 100 will be in the business in 3 years. I wouldn't worry to much about the write offs untill your first, second, third and then fourth $15,000 check. When that happens, you will file a Schedule C and deduct all appropriate business expenses, such as car expenses, business supplies and the like. Be very carefull of home office expenses, big compliance area for the IRS.

[Ziggy]

jlnorthrup122:
If you move to Las Vegas you could write off hooker expences as client entertaiment :D Yeah, but don't try to write-off the Married Women expenses(since they are better :rolleyes: ), you get no receipt from them...that is unless you're married to 'em.

[Havasu Cig]

As soon as the housing market drops not so many people will want to be in real estate any more. I have a friend that decided to leave his job as a fleet manager at a major car dealership to be a stockbroker a few years ago. Back then enybody could make money in stocks, kind of the way the housing market is now. This is probably as good as it will be for a while. Plan for the future. Just my .02

[Boozer]

3 to 5 out of 100? That's a pretty optimistic outlook. Hopefully I'll make it as one of the 3 but if not a couple years makin the money my sugar mama makes now will set me up well enough to start a nice productive business with the proceeds.

[Danhercules]

When that happens, you will file a Schedule C and deduct all appropriate business expenses, such as car expenses, business supplies and the like. [/QB]Thank you. I was waiting for some one to say " Deductions" They are not "write off's".
Yea, becarefull of the home office deductions, they will bite you in the arse. I dont know by experiance, but I know a few that can tell you.

[SoCalOffshore]

Cig, that's what I was talking about. As a financial advisor for 17 years myself, I saw many come and go over the last couple of years. Boozer, you have a great attitude and the sugar mama never hurts, lol.

[BIGTYME]

Havasucig,
I am a realtor in San Diego,
The housing market isnt gonna drop it never has! It may plateau but never go down or become a terrible market. everyone and their brother that isnt in real estate think they know what is gonna happen. PRICES WILL NOT GO DOWN! There is still gonna be home buyers and home sellers. There is still gonna be 15k comission checks. Its an awesome business to be in. Regardless of market it takes hard work.
Most people think that if they get a real estate license that they will be driving mercedes, living large, wearin rolex's, big offices. Its not like that. I wish they guy who is starting out the best of luck. The 3-5 out of 100 is very correct.
I have heard several times that you will make your first year in real estate what you made the last year at your old job. so if you made 50g's you can prob expect to make the same.
I'm not trying to be negative at all.Once again I wish you the best of luck.
The one tip i have is treat real estate like a real job. Get up early go to the office make calls, go prospecting and dont go home until you have put in 8 hrs. That will make you succesful.If you fall into the trap of " I'm self employed i can make my own hours" you will prob be one of the 92/100 that fail. Good luck

[Mandelon]

BIGTYME
[QB] Havasucig,
I am a realtor in San Diego,
The housing market isnt gonna drop it never has! It may plateau but never go down or become a terrible market. everyone and their brother that isnt in real estate think they know what is gonna happen. PRICES WILL NOT GO DOWN!Dude, what line of work were you in during the early 90's??? I managed foreclosures for banks and saw tens of millions of equity disappear all over San Diego and southern California. Values can definitely go down. Over the long term the trend is up, no doubt. But that doesn't mean dips and recessions won't happen.

[SoCalOffshore]

All correct except one thing. Real estate can and has gone done. Infact, for extended periods of time. Does anyone remember the top around 1990? Didn't rebound fully untill around 1999. I am talking the greater LA area. Of course, prices have now skyrocketed and when rates increase prices will soften. The degree of the softening will be directly attributable to the peak of mortgage rates. Then again, they will start to rise again. Much like the stock market, real estate is cyclical.

[C-2]

Mandelon:
BIGTYME
[QB] Havasucig,
I am a realtor in San Diego,
The housing market isnt gonna drop it never has! It may plateau but never go down or become a terrible market. everyone and their brother that isnt in real estate think they know what is gonna happen. PRICES WILL NOT GO DOWN!Dude, what line of work were you in during the early 90's??? I managed foreclosures for banks and saw tens of millions of equity disappear all over San Diego and southern California. Values can definitely go down. Over the long term the trend is up, no doubt. But that doesn't mean dips and recessions won't happen. Agree with Mandelon on this one. We used to run all the foreclosure (the tail end of it…..evictions) for Home Savings of America and Great Western Bank. In the early 90’s until 1996, at least 30 files a DAY would roll across our desk. Very sad stuff. Homes were over-encumbered beyond belief and people would walk away from them.
Say what you want about the economy…it’s diving. Cali right now is living on owner’s equity…how else can everybody afford a $50K truck and $100K boat on $50K per year? The market will drop and cycle itself over again. It’s already starting and the smart lenders are tightening things up.
Sorry, but true.

[BIGTYME]

so you guys are trying to tell me that from 90 - 96 housing prices didnt go up?

[moneypit]

The BIGGEST mistake i made in my life was not incorporating early enough....Once done. The corporation has a flat cheap tax..YOU will be taxed on what the corporation pays you. So, you pay yourself a minimum. Most of your bills will be paid by the corp. Car's phone, Costco... all those pictures and plant that you'll hang at home (i mean the office) The toilet paper you use at the home ( i mean the office). Entertainment (golf, dining, Bronco games....)
Then, if you need cash, you pay yourself a dividend from the corporation. You would need to find a good accountant... he or she will instruct you on the red flags (like trying to write of a portion of your home) You will learn what to use as write offs..The list is endless. But you will know which ones to stay away from.
You will only be taxed on what you were paid by the corp. Not what the corp makes.. Its cut and dry.

[moneypit]

Im not a realtor, but i have bought many properties...Yes its cyclical, but depreciation only seems to be in areas where there is an abundance of product. In my area here is a great shortage in property and homes. This area may see a ceiling, but i highly doubt that there will be a deline that will reproduce Palmdale. My house was built in 1986 and probably was bought for around $175,000 it now appariased at $550,000. I anticipate it to continue...
Also it depends on whats out there.. These builders are making crap on a matchbook. Homes that are on decent property will always maintain good value..

[C-2]

BIGTYME:
so you guys are trying to tell me that from 90 - 96 housing prices didnt go up? That’s not what I’m saying (although I can say yes, as a matter of fact my residence value actually dropped between 1994-1998 from my purchase price in 1993). Real estate over the long term will always appreciate; I think we all know that.
What I am saying is that it might not be a good time to get into the market. In fact I was listening to KNX news radio the other day and this was the very topic for several economists. They all agreed on one thing; when interest rates start climbing again the market will plateau then fall. They compared it to the stock market losses, where many stocks were over-valued. They said the fallout will be much worse than the stock market losses (although not sure exactly what they meant by that).
Are you saying the real estate market wasn’t in the dumps in those years? wink

[C-2]

But I'm not a realtor and I don't mean to argue, so I won't. :)

[dcb carrera]

One thing about real estate and good stocks ( not ones that disappeared) you don't lose anything unless you sell when they go down, hold on they will come back. Just my .02

[BIGTYME]

I wansnt in Real estate in the early 90's. I honestly cant see the market here in san diego coming down anytime soon.
just my .02

[Havasu Cig]

My father was a developer in the 80's and early 90's in San Diego / Orange County. When the real estate market dropped in 90 he lost a $hitload of cash because of the commercial and residential properties he had built or was in the process of building and had not yet sold. He had to unload them for alot less than what he had into them. The market can, and in my opinion will go down in the future.
I can remember when he was making a substantial amount of money in the 80's he kept saying "this is not going to last forever". He should have got out, but the money was to good I guess.
As a long term investment real estate is good. But as someone said above, I would not buy right now. The prices are inflated and will probably drop.
As far as stocks versus real estate, our financial adviser has shown me graphs with trends from both markets. believe it or not the stock market has performed better overall than real estate over the past 50 years. Although I do wish our money was invested in real estate right now because I would SELL!!!

[HavasuDreamin']

Havasu Cig:
As far as stocks versus real estate, our financial adviser has shown me graphs with trends from both markets. Believe it or not the stock market has performed better overall than real estate over the past 50 years. Although I do wish our money was invested in real estate right now because I would SELL!!! What type of real estate? Residential or commercial? It is easier to quantify the performance of the stock market than it is the real estate market. In fact how do you quantify the performance of the real estate market? :confused: I would like to see someone try to compare the two. My guess is you could shoot holes in that analysis.
If you know what you are doing, you can make a lot of jack in the commercial (or residential) real estate industry. Developers can create value with well mitigated risk. The stock market is much less controllable.........and as a firm believer that markets are efficient, indexing is the way to go in my humble opinion. There aren't many stock brokers that can show you that they have out performed the market as a whole for any length of time.
Just my $.02 that you didn't ask for. wink :D
[ June 04, 2003, 01:07 PM: Message edited by: HavasuDreamin' ]

[Havasu Cig]

I am no expert, that is why we have a a financial adviser. He was comparing residential real estate when we were talking to him.
Everybody thinks that residential real estate is great right now, but everybody thought the stock Market was great 3 years ago.
I think a balance would be better. I am just glad to see the Dow above 9000 now. I hope it continues. Just my .02

[Mandelon]

BIGTYME:
I wansnt in Real estate in the early 90's. I honestly cant see the market here in san diego coming down anytime soon.
just my .02 So you base your "prices are never going to go down" wisdom on 5 or 6 years of experience.... :rolleyes: I don't mean to dis your opinion, but if you haven't lived through a down cycle you have somethin' to learn.
You guys remember the "will do loans for food" cartoon?? :)
Real estate prices have been boosted by low interest rates, which will not last forever. And also the lack of anywhere else to invest...
What are you going to do with a pile of cash to invest? Leave it in the stock market and watch it continue to drop, or put it into apartments and collect rents instead?? The monthly returns are not huge, but are predictable. Appreciation is just a bonus.
When the stock market recovers and the interest rates rise, real estate will most likely level out. I don't think it will drop like it did in the 90's. I believe it will level out and appreciate at a more sustainable level.
The stock market looks to be recovering now, cap rates on apartments are getting out of wack, and wages are not keeping up with the purchase prices. NOD's and foreclosure notices are up all over the country. Not so much in So Cal yet, but it would not take much.
My collection of rinky-dink ghetto rental properties have gone from the low $100Ks to the $300Ks each! It defies logic. Remember the stock market.....if its too good to be true it probably is...

[CA Stu]

Once you are too smart to learn, you are screwed.
The real estate market, stock market, friggin' grocery market, all markets' prices are cyclical.
I was lucky enough to buy a repo house in 1998, the people owed $100k more than the house was worth, so they walked away from it. Well, they beat the shit out of it and walked away. I got a deal on it and did the repair myself.
Mandelon hit the nail on the head, but if I was lucky enough to have a buttload of $300k properties I paid $100k for, I would sell them, hold the cash and look for distressed properties in the next couple of yrs. I got 10 bucks says there will be a lot of them to choose from by 2008.
What is the length of the average real estate cycle ? 15 yrs?
Good luck, worrying about what to do with a $15k check you haven't yet made is in a profession you haven't even worked one day in is, well, interesting...
CA Stu

[stvneil]

it's a hell of a lot of w/e work.