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5 - Real Estate &amp; Income Taxes

# 5 - Real Estate &amp; Income Taxes - Oct 4 2011 Chapter...

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Oct 4, 2011 Chapter 5 - Income Taxes Session 2 - Robert Rooks 1

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Oct 4, 2011 Chapter 5 - Income Taxes Session 2 - Robert Rooks 2 Understanding What We Have Learned A working knowledge of the tax techniques we learned in chapter four is necessary for a complete, comprehensive, understanding of real estate. Understanding the needs of our investors is tantamount to serving the real estate owning public. If you master these techniques you will be a more valuable real estate professional.
Oct 4, 2011 Chapter 5 - Income Taxes Session 2 - Robert Rooks 3 What You Should Learn In this chapter you should learn the following; 1. The initial effect of tax benefits on real estate investments. 2. The long term effect of tax benefits on real estate investments. 3. The final effect of tax benefits on real estate benefits.

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Oct 4, 2011 Chapter 5 - Income Taxes Session 2 - Robert Rooks 4 Our Example In 1987 Jim and Laura Hankins purchased a four plex in Anaheim California. The purchase price was \$275,000. The Hankins put 20% of the purchase price as a down payment, or \$55,000 as a Cash Down Payment. The Hankins obtained a new 1 st Trust Deed and Note in the amount of \$220,000 at 9% interest, amortized for 30 years and payable in equal monthly installments of \$?,???.??
Oct 4, 2011 Chapter 5 - Income Taxes Session 2 - Robert Rooks 5 Finding The Payment Here we can find the payment by using a financial Tables Book. We can use a constant, normally a constant for \$1,000 at the given rate. In this example 30 years at 9% interest would give us a loan constant of \$8.05 per \$1,000 of loan. In our example we would divide the \$220,000 loan by \$1,000 which would give us 220. This 220 would represent how many 1,000 bills are in a \$220,000 loan. Next we would multiply 220 by the \$8.05 Loan Constant and come up with \$1,770.17.

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Chapter 5 - Income Taxes Session 2 - Robert Rooks 6 Finding The Payment The method most of us will use is the financial calculator. If we use the HP 17B we would have the following; n i PV PMT FV OTHER 360 9 220,000 ? 0 Then you would solve for the PMT and get;
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5 - Real Estate &amp; Income Taxes - Oct 4 2011 Chapter...

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