Forum Replies Created
My thoughts are that the asking price is always more than you should pay. To take a page from Robert Kiyosaki – you should look at 100 properties, offer on 10 and get exactly 3 acceptances. Of the 3 you would then cancel 2 and accept one.
If you get more than 3 acceptances, you know you are offering too high. If you get less, you are likely offering too low.
“their depreciation deduction relative to the purchase price has also increased.” that sounds wrong.
Depreciation is always calculated based on construction costs, so they would be depreciating on 175k less 2 years of depreciation. What they have said implies that depreciation for owner one was 175k over x amount of years and now for owner 2 it will be 250k over (x-2) years
Depreciation has a big effect on property cashflow. People looking for a cashflow positive place should generally see depreciation as one of the biggest factors. Generally rental income is always offset by rental income (depending on rental yield) and expenses. Depreciation comes in with a what is known as a “paperloss” which brings down your taxable income thereby saving you a fair amount of tax money.
Hey GameTime,
Just to reinforce what other people have been saying, the US property market is very different to the australian property market. For example, here we have negative gearing tax benefits. These don’t exist in the US. Unfortunately for us, this seems to have made investors more willing to pay a higher price for a property which may have a lower rental yield.
Robert’s strategy in his book encourages people to minimise risks associated with capital growth expectations. His ideas make sense from the point of view that if you find a property that has a good rental yield, one that would provide interest coverage (very hard to find in australia) then you can go out and buy with the confidence that you will not loose money, even if the value of the property goes down at some stage.
The other thing is that when Robert mentions an asset, he means it in the accounting sense of the word. A house is not an asset because if you purchase it on a mortgage you owe that money to the bank and the house itself generates no income.
