I’d be glad to discuss your situation with you privately.
Please email me your contact info at [email protected]
and post that you did so I can look for it.
One IMPORTANT thing that you need to realize is IF #1 above is your current primary residence (OR if you lived in it for 2 out of the last 5 years) you need to figure something out, esp since you are getting killed in taxes.
One of the huge benefits of rentals is depreciation of the dwelling over 27½ years, based on your COST.
For you to turn a 1996 cost basis property into a rental may not be in your best interest. You cannot depreciate the land. Your dwelling probably has a very low cost, which will result in a very small write off.
With your equity position, you will also be getting a poor return on your equity, and may in fact create more taxable income from this rental, rather than a write off.
IF this is your primary residence, you have a TAX FREE exclusion of $250K or $500K (if spouse on title)
You may be better off selling the property now, and reinvesting in multi units with leverage that could take your cost basis of 1996 ($200K ??) to something closer to $1 million, creating a MUCH larger write off of depreciation, with multi units and MUCH better income.
The only downside is that it does increase your property taxes, but it’s all a write off with a rental, and IF you believe in future appreciation, you may be rewarded handsomely for the risk.
The above scenario depends on your overall financial situation and I urge you to discuss this with your CPA as there are write off limits based on your income, but they are carried forward.
Many people do great by turning a primary residence into a rental, but they are really limiting their risk/reward if they have a large amount of equity, and low cost basis and could do MUCH better.
The tax free exclusion of $250k/$500k is a powerful incentive to want to cash out and possibly use the cash more wisely, even being conservative.
In general, you will be better off with a down payment of at least 20%, and an 80% 1st to avoid a higher rate 2nd.
I’d like to talk to you about your tolerance for risk and overall financial situation. [email protected]
