Tell me what to do

[92027_guy]

I’m kinda dealing with a similar situation but in reverse, I have a couple of outside CA rentals (one in TX and one in NC) and I’m on the edge of BK’ing them away. I think the downturn has been around long enough that people are starting to think of missed opportunities vs. getting out while you can. I can only imagine how pissed I’d be at myself for selling in 98 like the previous poster, but that is hindsight and the unknown future is really unknown. My NC house was bought for 137k in late 05, comps showed 150k in December 08 before the BofA layoffs. It’s a 250 a month neg. So far I’ve had no renter nighmares but there’s always that anxiety of getting a call about something expensive. Non money issues like Stress/complexity are also factors to consider.
I guess I’m trying to say it’s a gamble either way, and I have to agree with carlsbadworker whatever you choose hindsight will cleverly hide the bad and exaggerate the good so you will regret it. Not sure if that helped…

[paramount]

NEWSFLASH

According to my Realtor friend, 2008 was the 2nd best year going back 7 years for Temecula in terms of RE sales (I assume # of transactions).

[paramount]

NEWSFLASH

According to my Realtor friend, 2008 was the 2nd best year going back 7 years for Temecula in terms of RE sales (I assume # of transactions).

[paramount]

NEWSFLASH

According to my Realtor friend, 2008 was the 2nd best year going back 7 years for Temecula in terms of RE sales (I assume # of transactions).

[paramount]

NEWSFLASH

According to my Realtor friend, 2008 was the 2nd best year going back 7 years for Temecula in terms of RE sales (I assume # of transactions).

[paramount]

NEWSFLASH

According to my Realtor friend, 2008 was the 2nd best year going back 7 years for Temecula in terms of RE sales (I assume # of transactions).

[(former)FormerSanDiegan]

[quote=sc_alum]

Silly question, but rental income is taxable income AFTER you’ve deducted mortgage costs, right? It’s net, not gross?
[/quote]

Yes, it’s net, not gross, and it is figured on Schedule E with some “real” expenses as well as “phantom” expenses such as depreciation, which ultimately results in a decent tax advantage.

Here’s the long-short of it ..
Net income = Gross Income – Expenses

Gross Income = rent

Expenses:
Mortgage Interest
Property Taxes
Insurance
Maintenance
Property Management fees
advertising
Travel to/from property (with some limitations)
utilities while vacant (or if paid by owner, which I don;t recommend)
Some other stuff I am probably leaving out
Depreciation **

** You get to take a paper loss of ~3.63% of the value of the structure (not including land), since it is depreciated for tax purposes over 27.5 years. Assuming the place is worth 350K and 275-300K of that is the actual house, you are looking at a Depreciation (phantom, paper only for tax purposes) loss of ~10K per year.
Or in other words if you were able to pay down the mortgage such that you netted 10 K a year (not including depreciation), the depreciation would allow you to collect that 10K tax free. You do have to pay depreciation recapture when you sell, so this phantom loss is essentially a temporary tax loss for as long as you own this property.

So, most likely, for tax purposes you will be “losing” about 12K per year, though your out of pocket loss might only be $2000-3000 per year.

If you are married and make less than 150K this loss can be taken against ordinary income (it phases out at gradually starting at 100K). If you make over 150K, then it becomes a carryover loss for use in future years or when you sell.

Keeping the house as a rental can make a lot of sense if you keep it for the long haul. However, you need to read up as much as you can and decide if that is what you want to invest a few hundred per month into for the foreseeable future.

Also, if you are considering this solely as a financial necessity brought on by current market conditions, rather than part of a well-thought out financial strategy than it is unlikely you will be satisfied with the result.

[(former)FormerSanDiegan]

[quote=sc_alum]

Silly question, but rental income is taxable income AFTER you’ve deducted mortgage costs, right? It’s net, not gross?
[/quote]

Yes, it’s net, not gross, and it is figured on Schedule E with some “real” expenses as well as “phantom” expenses such as depreciation, which ultimately results in a decent tax advantage.

Here’s the long-short of it ..
Net income = Gross Income – Expenses

Gross Income = rent

Expenses:
Mortgage Interest
Property Taxes
Insurance
Maintenance
Property Management fees
advertising
Travel to/from property (with some limitations)
utilities while vacant (or if paid by owner, which I don;t recommend)
Some other stuff I am probably leaving out
Depreciation **

** You get to take a paper loss of ~3.63% of the value of the structure (not including land), since it is depreciated for tax purposes over 27.5 years. Assuming the place is worth 350K and 275-300K of that is the actual house, you are looking at a Depreciation (phantom, paper only for tax purposes) loss of ~10K per year.
Or in other words if you were able to pay down the mortgage such that you netted 10 K a year (not including depreciation), the depreciation would allow you to collect that 10K tax free. You do have to pay depreciation recapture when you sell, so this phantom loss is essentially a temporary tax loss for as long as you own this property.

So, most likely, for tax purposes you will be “losing” about 12K per year, though your out of pocket loss might only be $2000-3000 per year.

If you are married and make less than 150K this loss can be taken against ordinary income (it phases out at gradually starting at 100K). If you make over 150K, then it becomes a carryover loss for use in future years or when you sell.

Keeping the house as a rental can make a lot of sense if you keep it for the long haul. However, you need to read up as much as you can and decide if that is what you want to invest a few hundred per month into for the foreseeable future.

Also, if you are considering this solely as a financial necessity brought on by current market conditions, rather than part of a well-thought out financial strategy than it is unlikely you will be satisfied with the result.

[(former)FormerSanDiegan]

[quote=sc_alum]

Silly question, but rental income is taxable income AFTER you’ve deducted mortgage costs, right? It’s net, not gross?
[/quote]

Yes, it’s net, not gross, and it is figured on Schedule E with some “real” expenses as well as “phantom” expenses such as depreciation, which ultimately results in a decent tax advantage.

Here’s the long-short of it ..
Net income = Gross Income – Expenses

Gross Income = rent

Expenses:
Mortgage Interest
Property Taxes
Insurance
Maintenance
Property Management fees
advertising
Travel to/from property (with some limitations)
utilities while vacant (or if paid by owner, which I don;t recommend)
Some other stuff I am probably leaving out
Depreciation **

** You get to take a paper loss of ~3.63% of the value of the structure (not including land), since it is depreciated for tax purposes over 27.5 years. Assuming the place is worth 350K and 275-300K of that is the actual house, you are looking at a Depreciation (phantom, paper only for tax purposes) loss of ~10K per year.
Or in other words if you were able to pay down the mortgage such that you netted 10 K a year (not including depreciation), the depreciation would allow you to collect that 10K tax free. You do have to pay depreciation recapture when you sell, so this phantom loss is essentially a temporary tax loss for as long as you own this property.

So, most likely, for tax purposes you will be “losing” about 12K per year, though your out of pocket loss might only be $2000-3000 per year.

If you are married and make less than 150K this loss can be taken against ordinary income (it phases out at gradually starting at 100K). If you make over 150K, then it becomes a carryover loss for use in future years or when you sell.

Keeping the house as a rental can make a lot of sense if you keep it for the long haul. However, you need to read up as much as you can and decide if that is what you want to invest a few hundred per month into for the foreseeable future.

Also, if you are considering this solely as a financial necessity brought on by current market conditions, rather than part of a well-thought out financial strategy than it is unlikely you will be satisfied with the result.

[(former)FormerSanDiegan]

[quote=sc_alum]

Silly question, but rental income is taxable income AFTER you’ve deducted mortgage costs, right? It’s net, not gross?
[/quote]

Yes, it’s net, not gross, and it is figured on Schedule E with some “real” expenses as well as “phantom” expenses such as depreciation, which ultimately results in a decent tax advantage.

Here’s the long-short of it ..
Net income = Gross Income – Expenses

Gross Income = rent

Expenses:
Mortgage Interest
Property Taxes
Insurance
Maintenance
Property Management fees
advertising
Travel to/from property (with some limitations)
utilities while vacant (or if paid by owner, which I don;t recommend)
Some other stuff I am probably leaving out
Depreciation **

** You get to take a paper loss of ~3.63% of the value of the structure (not including land), since it is depreciated for tax purposes over 27.5 years. Assuming the place is worth 350K and 275-300K of that is the actual house, you are looking at a Depreciation (phantom, paper only for tax purposes) loss of ~10K per year.
Or in other words if you were able to pay down the mortgage such that you netted 10 K a year (not including depreciation), the depreciation would allow you to collect that 10K tax free. You do have to pay depreciation recapture when you sell, so this phantom loss is essentially a temporary tax loss for as long as you own this property.

So, most likely, for tax purposes you will be “losing” about 12K per year, though your out of pocket loss might only be $2000-3000 per year.

If you are married and make less than 150K this loss can be taken against ordinary income (it phases out at gradually starting at 100K). If you make over 150K, then it becomes a carryover loss for use in future years or when you sell.

Keeping the house as a rental can make a lot of sense if you keep it for the long haul. However, you need to read up as much as you can and decide if that is what you want to invest a few hundred per month into for the foreseeable future.

Also, if you are considering this solely as a financial necessity brought on by current market conditions, rather than part of a well-thought out financial strategy than it is unlikely you will be satisfied with the result.

[(former)FormerSanDiegan]

[quote=sc_alum]

Silly question, but rental income is taxable income AFTER you’ve deducted mortgage costs, right? It’s net, not gross?
[/quote]

Yes, it’s net, not gross, and it is figured on Schedule E with some “real” expenses as well as “phantom” expenses such as depreciation, which ultimately results in a decent tax advantage.

Here’s the long-short of it ..
Net income = Gross Income – Expenses

Gross Income = rent

Expenses:
Mortgage Interest
Property Taxes
Insurance
Maintenance
Property Management fees
advertising
Travel to/from property (with some limitations)
utilities while vacant (or if paid by owner, which I don;t recommend)
Some other stuff I am probably leaving out
Depreciation **

** You get to take a paper loss of ~3.63% of the value of the structure (not including land), since it is depreciated for tax purposes over 27.5 years. Assuming the place is worth 350K and 275-300K of that is the actual house, you are looking at a Depreciation (phantom, paper only for tax purposes) loss of ~10K per year.
Or in other words if you were able to pay down the mortgage such that you netted 10 K a year (not including depreciation), the depreciation would allow you to collect that 10K tax free. You do have to pay depreciation recapture when you sell, so this phantom loss is essentially a temporary tax loss for as long as you own this property.

So, most likely, for tax purposes you will be “losing” about 12K per year, though your out of pocket loss might only be $2000-3000 per year.

If you are married and make less than 150K this loss can be taken against ordinary income (it phases out at gradually starting at 100K). If you make over 150K, then it becomes a carryover loss for use in future years or when you sell.

Keeping the house as a rental can make a lot of sense if you keep it for the long haul. However, you need to read up as much as you can and decide if that is what you want to invest a few hundred per month into for the foreseeable future.

Also, if you are considering this solely as a financial necessity brought on by current market conditions, rather than part of a well-thought out financial strategy than it is unlikely you will be satisfied with the result.

[Author]

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