Comments on: I’m Moving, Should I Sell Or Rent My House

By: sell house for cash

sell house for cash — Sun, 08 Aug 2010 01:10:58 +0000

yes…it should be while renting our a property.
infact, we are planning to renting new homes at UK, which we purchased recently, for which planning to go through a proper channel.

By: Payton

Payton — Wed, 10 Jun 2009 02:03:21 +0000

“Real Estate Professional” is not required to deduct rental property costs from your taxes. That title is simply something the IRS came up with depending on how many hours you spend actively working your real estate vs. other activities. If you are a heavy investor it helps as some limits are removed, but it is not something you will most likely need to worry about renting out your property.

By: Tom

Tom — Wed, 10 Dec 2008 17:23:45 +0000

Mistake. There are no deductions for owning a rental property unless you are a real estate professional. That makes a big difference.

By: Erica Douglass

Erica Douglass — Sat, 20 Sep 2008 01:34:55 +0000

Hi Brian,

I think you are mostly right on this one. But there are a couple considerations I’d throw in:

1) Does he have a good cash reserve on hand? You’ll want about $10,000 (maybe a bit less with a condo where most repairs are covered by HOA, but still, at least $4000.) This covers you in case you get a crappy tenant you have to evict (you can lose up to 3-4 months’ rent while dealing with them). If you don’t have that cash reserve, or worse, if you have credit card debt or other high-interest debt, I can’t recommend going into a negative cash flow situation. In essence: Get your expenses under control and pay off all high-interest debt first.

2) He doesn’t say whether this condo is on a 15-year mortgage or a 30. (I’m assuming the best here and hoping he’s already locked in a fixed rate, since interest rates really won’t go much lower. An ARM will be a dangerous situation in a few years.) A 15-year mortgage is much easier to “lose” a few hundred dollars a month on, since you will only have ~10 years left to be negative cash flow. If you’re in a 30-year mortgage — that is a LOT of time to consistently be upside down. Sure, rents could go up — but I watched here in the Bay Area as rents went down for years after the dot-com bubble. So you can’t count on rents even rising with inflation. Adjusted for inflation, the rent I’m paying now is less than the rent for a comparable place in 1999 in San Jose. Yikes.

There are a lot of alternatives to consider, but I’d lean toward “no” unless you have a 15-year mortgage, no high-interest debt, and a good 5-figure amount in cash that you don’t plan to touch for other purposes.

-Erica