Condo – sell or rent out?

[Bloat]

I’ve been looking at the post by “CMRJoe” (or maybe both of you) with similar numbers & situation, but he is married. Your deduction would be only $5150.

[(former)FormerSanDiegan]

I ran a few quick numbers looking at the Schedule E – and my tax write-off is a few hundred dollars more if I stay in the place, versus renting it out as the rental income is greater than what I can write off for depreciation+HOA.

Not sure I completely follow.

Did you include the interest on the loan, the property taxes and the insurance ? These add up to considerably more than the rent, since you said you would be negative 500-700 per month. Add the HOA and depreciation and you are looking at a tax loss of probably 1200-1500 per month.

Sure you’re actual tax write off might be a bit less than if you lived in it. But, do not isolate payment of taxes as a single consideration. Compute all expenses after taxes for whatever scenarios you are considering.

E.g. – If you live in the unit and continue to pay 2000 per month and 1700 is deductible, living in the unit might cost you $1400 per month after taxes (assume 35% in tax relief, might be less). If you rent it out for $1K per month, and you have a tax loss of 1K per month (including depreciation), you have an after-tax negative cash flow of about 700 minus taxes on 1K, let’s say $350. So your after tax monthly carrying costs are 350 per month.

Again, consider everything (cash in, cash out, including income and taxes) for a complete picture. Sure you would have a somewhat lower tax break because of the 1K per momth income. But don’t ignore the fact that you would be getting the additional 1K per month of income.

Also, I want to emphasize that if your hold-and-rent strategy is based on trying to sell within the next 3 years, you might as well sell it today.

[(former)FormerSanDiegan]

I ran a few quick numbers looking at the Schedule E – and my tax write-off is a few hundred dollars more if I stay in the place, versus renting it out as the rental income is greater than what I can write off for depreciation+HOA.

Not sure I completely follow.

Did you include the interest on the loan, the property taxes and the insurance ? These add up to considerably more than the rent, since you said you would be negative 500-700 per month. Add the HOA and depreciation and you are looking at a tax loss of probably 1200-1500 per month.

Sure you’re actual tax write off might be a bit less than if you lived in it. But, do not isolate payment of taxes as a single consideration. Compute all expenses after taxes for whatever scenarios you are considering.

E.g. – If you live in the unit and continue to pay 2000 per month and 1700 is deductible, living in the unit might cost you $1400 per month after taxes (assume 35% in tax relief, might be less). If you rent it out for $1K per month, and you have a tax loss of 1K per month (including depreciation), you have an after-tax negative cash flow of about 700 minus taxes on 1K, let’s say $350. So your after tax monthly carrying costs are 350 per month.

Again, consider everything (cash in, cash out, including income and taxes) for a complete picture. Sure you would have a somewhat lower tax break because of the 1K per momth income. But don’t ignore the fact that you would be getting the additional 1K per month of income.

Also, I want to emphasize that if your hold-and-rent strategy is based on trying to sell within the next 3 years, you might as well sell it today.

[(former)FormerSanDiegan]

I ran a few quick numbers looking at the Schedule E – and my tax write-off is a few hundred dollars more if I stay in the place, versus renting it out as the rental income is greater than what I can write off for depreciation+HOA.

Not sure I completely follow.

Did you include the interest on the loan, the property taxes and the insurance ? These add up to considerably more than the rent, since you said you would be negative 500-700 per month. Add the HOA and depreciation and you are looking at a tax loss of probably 1200-1500 per month.

Sure you’re actual tax write off might be a bit less than if you lived in it. But, do not isolate payment of taxes as a single consideration. Compute all expenses after taxes for whatever scenarios you are considering.

E.g. – If you live in the unit and continue to pay 2000 per month and 1700 is deductible, living in the unit might cost you $1400 per month after taxes (assume 35% in tax relief, might be less). If you rent it out for $1K per month, and you have a tax loss of 1K per month (including depreciation), you have an after-tax negative cash flow of about 700 minus taxes on 1K, let’s say $350. So your after tax monthly carrying costs are 350 per month.

Again, consider everything (cash in, cash out, including income and taxes) for a complete picture. Sure you would have a somewhat lower tax break because of the 1K per momth income. But don’t ignore the fact that you would be getting the additional 1K per month of income.

Also, I want to emphasize that if your hold-and-rent strategy is based on trying to sell within the next 3 years, you might as well sell it today.

[(former)FormerSanDiegan]

Raybyrnes –

With respect to the qualification it is a fairly loose interpretation as the 750 hours. Is the time you are on piggington considered research.

Probably. That would be an easy way to rack up the 750 hours.
The other problem is that RE has to be your primary line of work.

So, I think people who do not otherwise have full-time positions (or those who work in cash jobs) could more easily find a way to justify to be classified as a RE professional. The other loophole is that if you are married, just one of you has to be a RE professional. Most people who are full-time W-2 employees in other lines of work would be excluded.

[(former)FormerSanDiegan]

Raybyrnes –

With respect to the qualification it is a fairly loose interpretation as the 750 hours. Is the time you are on piggington considered research.

Probably. That would be an easy way to rack up the 750 hours.
The other problem is that RE has to be your primary line of work.

So, I think people who do not otherwise have full-time positions (or those who work in cash jobs) could more easily find a way to justify to be classified as a RE professional. The other loophole is that if you are married, just one of you has to be a RE professional. Most people who are full-time W-2 employees in other lines of work would be excluded.

[(former)FormerSanDiegan]

Raybyrnes –

With respect to the qualification it is a fairly loose interpretation as the 750 hours. Is the time you are on piggington considered research.

Probably. That would be an easy way to rack up the 750 hours.
The other problem is that RE has to be your primary line of work.

So, I think people who do not otherwise have full-time positions (or those who work in cash jobs) could more easily find a way to justify to be classified as a RE professional. The other loophole is that if you are married, just one of you has to be a RE professional. Most people who are full-time W-2 employees in other lines of work would be excluded.

[2008]

I hear you, yes I’m looking at the full cash-in, cash-out. Just meant that the write-off I can take living in the home (mort int +prop tax), versus the additional items I can write-off renting it out (depreciation, HOA, insurance), are offset by the rental income.

Before a reset, my carrying costs are 600/mo post tax implications. Plus whatever it costs me to live somewhere else if I rent this place out.

I’m just looking at the impact over the next 3 years before the reset- not to imply that I would sell in 3 years, but I’m trying to get a financial picture before and after the reset. Once it resets, we’re talking about a bump from $1700/mo to $2400/month in cash out.

[2008]

I hear you, yes I’m looking at the full cash-in, cash-out. Just meant that the write-off I can take living in the home (mort int +prop tax), versus the additional items I can write-off renting it out (depreciation, HOA, insurance), are offset by the rental income.

Before a reset, my carrying costs are 600/mo post tax implications. Plus whatever it costs me to live somewhere else if I rent this place out.

I’m just looking at the impact over the next 3 years before the reset- not to imply that I would sell in 3 years, but I’m trying to get a financial picture before and after the reset. Once it resets, we’re talking about a bump from $1700/mo to $2400/month in cash out.

[2008]

I hear you, yes I’m looking at the full cash-in, cash-out. Just meant that the write-off I can take living in the home (mort int +prop tax), versus the additional items I can write-off renting it out (depreciation, HOA, insurance), are offset by the rental income.

Before a reset, my carrying costs are 600/mo post tax implications. Plus whatever it costs me to live somewhere else if I rent this place out.

I’m just looking at the impact over the next 3 years before the reset- not to imply that I would sell in 3 years, but I’m trying to get a financial picture before and after the reset. Once it resets, we’re talking about a bump from $1700/mo to $2400/month in cash out.

[2008]

And not to jump onto the marriage tax issue – but it does sound like if I ever get married my tax benefits from write-offs get killed by the additional income. sounds like a reason not to get married!

[2008]

And not to jump onto the marriage tax issue – but it does sound like if I ever get married my tax benefits from write-offs get killed by the additional income. sounds like a reason not to get married!

[2008]

And not to jump onto the marriage tax issue – but it does sound like if I ever get married my tax benefits from write-offs get killed by the additional income. sounds like a reason not to get married!

[(former)FormerSanDiegan]

Before a reset, my carrying costs are 600/mo post tax implications. Plus whatever it costs me to live somewhere else if I rent this place out.

I’m just looking at the impact over the next 3 years before the reset- not to imply that I would sell in 3 years, but I’m trying to get a financial picture before and after the reset. Once it resets, we’re talking about a bump from $1700/mo to $2400/month in cash out.

Got it.

Seems like if you can rent a place in your new town for $1100 per month it is essentially a wash in the short run.

Now it just boils down to whether you want to toss away 70K now, or cross your fingers and either toss away 100K 3 years from now or break even maybe a decade or more from now, or something in between.

Moving to the new town/job likely means a bump in pay and more up-side. Whatever you do, don’t make the career choice based on your housing situation.

[(former)FormerSanDiegan]

Before a reset, my carrying costs are 600/mo post tax implications. Plus whatever it costs me to live somewhere else if I rent this place out.

I’m just looking at the impact over the next 3 years before the reset- not to imply that I would sell in 3 years, but I’m trying to get a financial picture before and after the reset. Once it resets, we’re talking about a bump from $1700/mo to $2400/month in cash out.

Got it.

Seems like if you can rent a place in your new town for $1100 per month it is essentially a wash in the short run.

Now it just boils down to whether you want to toss away 70K now, or cross your fingers and either toss away 100K 3 years from now or break even maybe a decade or more from now, or something in between.

Moving to the new town/job likely means a bump in pay and more up-side. Whatever you do, don’t make the career choice based on your housing situation.

[Author]

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