Very good explanation on how the rate hits different income. I want to share two thoughts. One, for the question of if I pay 22%, definitely not, lol. This is because of the real estate I own. The government wants people to live in decent places so they provide incentives to repair and replace many items on a home. Yes, some take advantage of this, but for the most part (as with all businesses) people want to keep their tenants happy.
The second item I wanted to discuss is the use of you marginal approach on some of my deal structures. Interest rates are high right now, for investors they can be up to 10%. If you take the situation you discussed here and applied it to assumable mortgages, you can lower your rate significantly. If someone is looking at a median priced home (maybe 400-450K) with a 250K mortgage (assuming it is assumable - meaning the buyer can take over the payments) the difference is about 150K-200K. Take out a down payment of 10-20%, say 75K, the remaining amount owed to the seller is 375K. If the loan for 250K the seller has is at a 3% rate, the difference (375k -250k mortgage) is 125K. This 125K can be financed at todays rates, but the blended rate will be much lower than a standard bank rate. Let me rewrite this in the terms used in the article above. Essentially, you are taking a previous loan with a low rate and stacking the marginal amount on top of this to lower the average interest rate.
I enjoy reading how different items can be used in different areas and I have seen many people do this in the past and I present it often when meeting with seller (not bites, the usually finance the whole thing at lower rates... but that is a different story, lol).
Great explainer. Most people think of themselves as being in a bracket when really their income is in multiple brackets. It's sort of like how people see the refund as a sign they did things right rather than as a sign that they gave the IRS a year-long loan.
Very good explanation on how the rate hits different income. I want to share two thoughts. One, for the question of if I pay 22%, definitely not, lol. This is because of the real estate I own. The government wants people to live in decent places so they provide incentives to repair and replace many items on a home. Yes, some take advantage of this, but for the most part (as with all businesses) people want to keep their tenants happy.
The second item I wanted to discuss is the use of you marginal approach on some of my deal structures. Interest rates are high right now, for investors they can be up to 10%. If you take the situation you discussed here and applied it to assumable mortgages, you can lower your rate significantly. If someone is looking at a median priced home (maybe 400-450K) with a 250K mortgage (assuming it is assumable - meaning the buyer can take over the payments) the difference is about 150K-200K. Take out a down payment of 10-20%, say 75K, the remaining amount owed to the seller is 375K. If the loan for 250K the seller has is at a 3% rate, the difference (375k -250k mortgage) is 125K. This 125K can be financed at todays rates, but the blended rate will be much lower than a standard bank rate. Let me rewrite this in the terms used in the article above. Essentially, you are taking a previous loan with a low rate and stacking the marginal amount on top of this to lower the average interest rate.
I enjoy reading how different items can be used in different areas and I have seen many people do this in the past and I present it often when meeting with seller (not bites, the usually finance the whole thing at lower rates... but that is a different story, lol).
Thanks, take care!
Always great to hear about tax strategies people use. Thanks for sharing.
Great explainer. Most people think of themselves as being in a bracket when really their income is in multiple brackets. It's sort of like how people see the refund as a sign they did things right rather than as a sign that they gave the IRS a year-long loan.