ghostguy123
Footballguy
Can someone give me a brief tutorial of how capital gains tax works for selling a rental property in Ohio?
I bought it August 2014.
I bought it August 2014.
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Personal Finance Advice and Education! (10 Viewers)
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culdeus
Footballguy
STEADYMOBBIN 22
Footballguy
Morning guys.
Thoughts on the housing market? We’re going to sell in the next couple of months and I have the same feeling I had prior to the market crash when we could have sold our house for almost double what we owed on it. If I would have listened to my gut then I would have had gained a few hundred grand in my pockets.
I went to look at a house recently and there were 30 family’s there and more showing up as we left. We looked at a new neighborhood and the houses are $100k more now than 6 months ago. People are lining up to buy these $900k houses that are poorly built and crammed within 2 feet of each other. Everything we’re looking at is in the $700-1.2 million range and these aren’t mansions.
Im by no means no expert but I’m leaning towards selling and renting for awhile, even for a couple of years. I was thinking of taking our cash and investing it in some type of short term CD or something that isn’t relying on the market. I’m obviously out of my element here and don’t even know if that’s possible.
Thoughts?
Thoughts on the housing market? We’re going to sell in the next couple of months and I have the same feeling I had prior to the market crash when we could have sold our house for almost double what we owed on it. If I would have listened to my gut then I would have had gained a few hundred grand in my pockets.
I went to look at a house recently and there were 30 family’s there and more showing up as we left. We looked at a new neighborhood and the houses are $100k more now than 6 months ago. People are lining up to buy these $900k houses that are poorly built and crammed within 2 feet of each other. Everything we’re looking at is in the $700-1.2 million range and these aren’t mansions.
Im by no means no expert but I’m leaning towards selling and renting for awhile, even for a couple of years. I was thinking of taking our cash and investing it in some type of short term CD or something that isn’t relying on the market. I’m obviously out of my element here and don’t even know if that’s possible.
Thoughts?
ghostguy123
Footballguy
Just to piggyback on your post a bit....
I have two rentals (one paid off and one not), and I was considering selling them in what appears to be a sellers market. I know zillow is not some 100% accurate thing, but both my rentals have increased their "zestimate" by like 25% over the past 6 months or so. One of the condos in the same complex (which is very comparable to one of mine) sold recently for an amount pretty close to that zestimate.
I was considering selling them both, taking the money to pay off my house, max out 403b, max roth, and then maybe buy more rentals down the road when there is an inevitable downswing in property values again.
If both my tenants renew for another year, then not sure I would do it, but if one or both leaves (both very good tenants) then I think I will look into selling.
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STEADYMOBBIN 22
Footballguy
NutterButter
Footballguy
According to Zillow, by house has gone down $40k (over 10%) in value of the past 6 months 
. Maybe someone got murdered here that I don't know about.
. Maybe someone got murdered here that I don't know about.
ghostguy123
Footballguy
Zegras11
Footballguy
It's all supply and demand driving prices and has nothing to do with the crash ten years ago. There are incredible inventory issues just about everywhere. Some of the large, over heated markets did correct a bit the last 4 months. But.................
I'm already seeing many offers on homes this month after a minor slow down from last October.
I'm already seeing many offers on homes this month after a minor slow down from last October.
-OZ-
Footballguy
Largely I think housing markets are local. From your description it sounds like it could be a good time to sell but that's just speculation.STEADYMOBBIN 22 said:
They recently changed their algorithm (NPR ran a story about their contest to increase accuracy). Our house dropped $10k in the last month which is probably more accurate than the highest. No worries on our end as we're not selling for maybe 15 years anyway.NutterButter said:According to Zillow, by house has gone down $40k (over 10%) in value of the past 6 months
NutterButter
Footballguy
Did they change the algorithm for the town you live in as well b/c that barely went down? I'm not worried either. I''ll probably die in this house.
-OZ-
Footballguy
I think they said it was nation wide. Our city is growing fast, and we just bought in 2016, so that might have something to do with the last one being more accurate.
NutterButter
Footballguy
If you look at the zestimate history and details section, it shows a history and future projection for your property as well as your zip code. While my property took a steep drop in 9/18, my zip did not. Could that be b/c they didn't use the same new algorithm for the zip?
I'm not familiar with Ohio taxes but I would definitely recommend getting a CPA firm to do your taxes this year. Selling a rental property and how it's reported on your tax return can get messy.
-OZ-
Footballguy
No idea. Maybe your house was just off? Or other features of your house were affected differently? If you're really concerned about it you could call an agent or just look for comparable homes that sell in your school district.
ghostguy123
Footballguy
The condo I bought at the end of 2017 was purchased for 70k. Back in 2001 it sold for 106k. If anything the entire development is in better shape than back in 2001. Current zestimate of 96k that projects to increase this year. I sure hope so.
Yep. Inventory is still a huge issue. There was some slowing down as rates rose and houses are sitting longer. But if your underlying local market is strong, then then housing market will continue to be. If you are in a place with stagnant job and low population growth then it may be a good time to take gains.
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Zegras11
Footballguy
NutterButter
Footballguy
I'm just wondering if someone was murdered here recently and no one told me about it. I did go on vacation about when the drop occurred.
Sand
Footballguy
Even with this change on my rental house (I have that change captured in Personal Capital as PC didn't retroactively change anything) Zillow claims it has roughly doubled in value over the last year. IMO they were wrong on the low side and now wrong on the high side. Big grain of salt with this number.
Sand
Footballguy
NutterButter
Footballguy
SFBayDuck
Footballguy
Let's talk HSAs, as I just got one for the first time this year.
What are the strategies regarding investing these funds? Right now I don't see needing to access them to pay for medical expenses, but that could obviously change with a large, unexpected expense. Do people invest all of it in ETFs? Keep some in cash, some invested? Other?
Speaking of large, unexpected expenses, I had an ER visit in December that cost me a couple racks (after insurance paid their part). So the services were in December, but I paid the bills in January. As I didn't have an HSA until January, could I reimburse myself for this? Or is it based on when the actual services were rendered? I haven't been able to find clarification on that point.
What are the strategies regarding investing these funds? Right now I don't see needing to access them to pay for medical expenses, but that could obviously change with a large, unexpected expense. Do people invest all of it in ETFs? Keep some in cash, some invested? Other?
Speaking of large, unexpected expenses, I had an ER visit in December that cost me a couple racks (after insurance paid their part). So the services were in December, but I paid the bills in January. As I didn't have an HSA until January, could I reimburse myself for this? Or is it based on when the actual services were rendered? I haven't been able to find clarification on that point.
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Respect the TECH
Footballguy
Wanting to start Roth IRAs for wife and myself. Is it as simple as starting an online account on Vanguard as a Roth IRA and choosing one of their target funds closest to our retirements? I am not that knowledgeable with all the investment choices and feel it would be best to use their target funds. Since we are hoping to retire around the same time, would we be wise to open one at T. Rowe Price for one of us since we are planning on using Vanguard for one?
wilked
Footballguy
Respect the TECH
Footballguy
Thanks!
Respect the TECH
Footballguy
Understand. More like a set it and forget it except that for maxing out the yearly contribution.
-OZ-
Footballguy
Target date funds are certainly one way to go, especially if you just want to set it and forget it.
I'm a bigger fan of the three-fund approach — a total-market U.S. stock-index fund a total-market U.S bond-index fund and a total-market international-stocks index fund.
Depending when you want to retire and how you feel about risk, set your stock allocation. I'm guessing (simply a guess, could easily be wrong) you want more security than I do in my portfolio. Whereas I'll use a 90/10 allocation, you might want 100 or 110 - age in stock.
I want 30% international, some will say skip it entirely, others vary 20-40%, a few go higher. This is probably the least important part but stocks outside the US have not done as well as the US this past decade.
Let's say you're 30 and want an allocation 110- age in stock, 20% international. Your portfolio would look like 20% BND (or an equivalent bond fund), 16% VEU (ex us ETF or fund), 64% VTI (us stock). It's pretty easy to set up and manage. Personally I rebalance every year near our anniversary (mostly because I don't want to do it during Christmas or in January, I find August makes sense).
Or just grab a target fund. Often these are more conservative than I'd like but that's personal opinion.
KCitons
Footballguy
Would the shark move call for choosing a target fund that is 10-20 years further out than your retirement date to maintain a more aggressive approach? Or are all target funds too conservative?
-OZ-
Footballguy
Take a look at the allocation, decide from there.
https://advisors.vanguard.com/web/c1/fas-investmentproducts/1691/portfolio#composition-tab-set
One thing, and it might not matter at all, is the Target date funds might have more or less international than you want.
The funds might also have a higher cost than owning the underlying funds or ETFs outright. (Because you're paying someone to buy and sell within the fund of funds, while also paying the manager of the underlying funds.)
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culdeus
Footballguy
In all reality the difference between year +30 and +40 is nothing. They are very open about the fact that they expect you to hold it forever and they will actively adjust the AA +15 out.
KCitons
Footballguy
I was approaching this from @Respect the TECH's standpoint of not knowing what funds to put his money in. Using a target fund diversifies the money. Using a target fund +10 or +20 years can increase or decrease your adversity to risk. The other concern is, if someone doesn't understand how to protect their money as they approach retirement, then self managing may leave too much money at risk. For someone that has zero understanding of the market, target funds (and yearly adjustments) can be an option to help.
culdeus
Footballguy
I was just saying going +20. Hell, even -20 the TF portfolios look for all intents the same asset mix wise.
KCitons
Footballguy
Sorry, +20 probably isn't a fair comparison. I should have said top, middle, and bottom. The assets are the same, but the percentage of each holding is different.
If I was concerned about the market, was closer to retirement, or had a low adversity to risk, I could put my money in 2025 Fund. If things changed or was younger, I could put my money in the 2065 Fund. Obviously, someone could just use one of those portfolios to create the same with individual accounts.
fred_1_15301
Footballguy
I just took a call with a financial advisor (not my advisor) regarding an AXA structured capital annuity segment plan. It’s a retirement vehicle that allows you to invest in the S&P 500 index and protects you against some risk. The current offering is a 6 year segment that removes the first 10% of losses and has no cap on the upside. Thus, if after 6 years the S&P 500 is up 20%, I would see a full 20% return. If after 6 years, the S&P is down 9.9%, I’m down nothing. There are no fees. The one downside is that there is a penalty if I wanted to withdraw money before the 6 years is up. Since it’s an annuity, I have no interest in withdrawing until I’m 59. I’m currently 41 if that makes a difference. Anyone with experience? Seems like a decent option for a retirement income.
No fees and no cap on your upside while giving you up to 10% in losses back?
I'm not buying it. There's gotta be more to than that.
It would be insanely popular if it was true.
culdeus
Footballguy
Ask for the fact sheet on this. I have serious doubts that the facts you present here are completely clean.
Just a quick google of this product shows both upside caps, load fees, and ongoing fees for what I think is the similar AXA product.
fred_1_15301
Footballguy
Yes I’m going to confirm before signing anything but I didn’t see any fees when I skimmed through the prospectus. Also they come out with new products every 2 weeks and the current one has no upside cap.
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fred_1_15301
Footballguy
Sand
Footballguy
This part is probably the sales guy blowing smoke up your... I flat out think this is a lie. This is going to be 20% capped before fees? That's an expensive hedge - 3.25% per year gain capped before fees. After fees you're looking at probably 2% total possible upside per year. This review notes a front load fee, underlying fund fees, a strategy change fee, and an outperformance fee.
Big caveat emptor here. You'll need to read the entire contract to find these calcs and work it out.
BTW, just as my personal philosophy, if an investment requires me to read a 30 page fine print contract to figure out how it actually works it falls into the "way to effing hard to understand" pile. I shy away from complicated investments. Which, for me, is probably anything more complicated than a covered call.
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fred_1_15301
Footballguy
Yeah I think you guys are right. The prospectus is a 102 pages long so I’m sure there is a catch in there somewhere.
culdeus
Footballguy
There's some stuff on the web about this that makes me think you aren't that far off on the pitch.
https://us.axa.com/axa-products/retirement-planning/variable-annuities/structured-capital-strategies/market-trend-indicator.html
This looks like they charge 1% per year for 5% max and will not charge you more fees that exceed your downside clip rate, and go so far as to refund fees for negative performance. Ok. So at the end of this whatever you made they are going to take 5% of it provided it doesn't flip you negative.
What I don't get (Granted I skimmed the hell out of this) is why it seems like for more downside risk the cap is also decreasing. I would expect the opposite.
Don't Noonan
Footballguy
Some good responses so far. I am a Financial Advisor with a major wirehouse firm and can tell you these types of annuities are becoming more popular. This particular variable annuity from Axa has no minimum age so at age 41 you are okay but maximum age is 85. He is correct that it is a 6 year term and you have 2 choices, a point to point snapshot of S&P 500 currently gives you 10% protection on downside and no cap on upside(Option B is 20% downside protection with upside cap at 85%. Option C is 30% downside protection and 55% cap on upside). Alternatively you could choose 6 1 year term segments on S&P 500 with 10% downside protection each year and 12% cap on upside each year.fred_1_15301 said:
There are no fees on this product. However, keep in mind you are not receiving any dividends while you hold this because AXA is effectively using options on the S&P 500 for your contract. Assuming this is in a brokerage account the annuity is giving you tax deferral on gains but keep in mind when you ultimately cash it out the gains are treated as ordinary income and not long term capital gains. Also, if this is in brokerage account make sure you do not need this money until age 59 1/2 because there is a 10% penalty to withdraw before then as well as a deferred sales charge of up to 6% if taken out within 6 years.
Not a bad investment as long as you are sure you do not need the money for at least 6 years or until age 59 1/2.
fred_1_15301
Footballguy
Thanks a lot! This is very helpful. I’m definitely not planning to withdraw until 59. My one concern is that after 6 years I may not find a similar product with no upside cap.
Don't Noonan
Footballguy
The point to point 6 year S&P 500 with no upside cap and 10% downside looks to be the best option to me. You are correct that there is no guarantee in 6 years you can reinvest with similar terms. However, since these are becoming more popular I believe you will have a good chance of finding something similar.
wilked
Footballguy
Run don’t walk away. See here. Note the reasoned responses (should be illegal / etc).fred_1_15301 said:
https://www.bogleheads.org/forum/viewtopic.php?t=224034
I also love Noonans response, an FA reinforcing another FAs swindle.
The poster who said don’t trust a product that needs 103 pages to explain itself was right on.
Don't Noonan
Footballguy
Look, annuities aren't for everyone but they work well in the right situation. I can count on one two hands the number of annuities that I have sold in 15 years but by all means take a shot at me. I pride myself on doing what is best for my client.
Edit to add I have not read the prospectus on this annuity I just spoke to an AXA rep today. After reading some of the responses on your link I would not be too confident they are correct on the assumption of fees.
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Few questions, still seems too good to be true in my mind.
1. How is AXA making money on this if there are no fees and they're guaranteeing a downside protection?
2. Is there a way to buy these outside of a brokerage account where you would be taxed on LTCG?
