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Rental properties/tax question

Discussion in 'Non-Vegas Chat' started by CaptCampion, May 19, 2017.

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  1. CaptCampion

    CaptCampion High-Roller

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    Wife and I have substantial equity in our Portland home and want to start putting it to work for us.

    We could also stand to downsize.

    Our currently house is on a 30yearfixed at 3.75, we owe 250k, rough estimate on sale price is 550-600k

    We could rent it for 3k pretty easily I think. There's a private college about a mile from us nestled in this amazing neighborhood

    Obvious idea would be to keep this house as a rental, and find another smaller house to live in for a couple of years. We have a son who will be off to college in 4 years and then we are empty nesters.

    There's a house not far from here that would be exactly what we are looking for. It's my parents' house. They own it free and clear, and are financially set. Dad is 78 and has Parkinson's, mom is legally blind and can't drive. I can't see them staying there more than 4 years.

    One thought would be to buy the house from them now, and have them remain as rentors. So it's basically a paper transaction and nobody moves. More of a benefit to me than them. They get 350k in their pocket (which they don't particularly need). I get a rental property that frankly is a house I want to keep in the family (they bought it in 1969 for 25k and it's the only house they ever lived in. Our kids have such great memories of that place). I understand that there are rules regarding the sale price and rent charged (has to be within 20% of FMV). But we could also avoid paying anything to a real estate agent.

    Anyhow, I'm not sure if anyone here has ever done something like that. And obviously we'd eventually contact a real estate attorney when the time comes. I'm just curious

    Then there's the whole can of worms about renting a house to college students.....
     
  2. nostresshere

    nostresshere Mr. Anti Debit Card

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    What you are suggesting is fairly easy to do and done often. (buying parents house and renting back)

    What I do not understand is your plan to "put your equity to work".

    Also, it looks like you would not downsize for a few years depending on the situation with your parents.
     
  3. jgates8

    jgates8 VIP Whale

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    I wish you good luck. I wouldn't ever want to rent to college students, however you can be very lucky. My kids both received all of their security deposits back on all college apartments, and my daughter was told in the rental that either she really knew how to clean or she never even lived in her apartment while she rented it lol.
     
  4. Valgal

    Valgal VIP Whale

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    You could look into airbnb if your area is hot for vacation rentals. The town I live in is hot for B and Bs right now. I have several friends who bought smaller homes for that. There are 4 houses on my block that are B and Bs and almost every weekend they are rented out. I would much rather do that than a monthly rental- I also have friends that have been through rental nightmare.

    But our town is a destination place for most of Texas- I do hate it on the weekends but the businesses are rolling in $$$ right now.
     
    40th Wedding Anniversary if we make it that long
  5. vegasdev

    vegasdev VIP Whale

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    just be sure that you REALLY want to be a landlord. it is not for everyone. I was never good at it. man if I could turn back time.
     
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  6. CaptCampion

    CaptCampion High-Roller

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    Yeah honestly I'm not sure if I do want to be a landlord. This house we live in is 5 bedrooms with a layout that would be perfect for big parties. I'm not sure I want to take on the headache of dealing with all that.
     
  7. CaptCampion

    CaptCampion High-Roller

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    Your friends bought houses specifically so they could Air BNB it?

    I've thought about doing that too.

    We have a daughter who lives in Denver and is getting married next year. Pretty sure she's staying down there for quite a while. We've also talked about buying a property in a place like Colorado Springs that we could rent or air bnb to pay the mortgage on it and then eventually move down there. Denver itself is too expensive but I'd love a place in Colorado that's cheaper and not too far from the girl


     
  8. DESPERADO

    DESPERADO VIP Whale

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    :wave: wife & had a rental home for 13 yrs. Same renters the entire time. Young couple with 3 kids. Not the greatest, not the worst. Home was a great tax write off, but when we sold it believe me IRS got their share. Plus the cost of updates, we are happy to not landlords any longer. Do what is best 4 u. Good luck.:beer:
     
  9. Valgal

    Valgal VIP Whale

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    I have one friend who bought the house next door to her- very small cottage. Strictly a B&B and she has it rented every weekend plus some during the week. Another friend bought a smaller house she and her husband live in now new empty nesters. They use their original home with a pool - larger and nicer for the B&B. The house next door to me goes for $300 a night. It is a small 3 bedroom. It advertises it sleeps 8- 3 queen beds and a pull out. I think most b/bs here charge an extra mandatory housekeeping fee- it is not included in nightly fee. But it is a good deal for those who want a nice stay and I ends up being cheaper than a hotel. Every weekend there is at least 4-6 young - loud women- usually Houstonites - and about 3 luxury SUVs parked out front.

    I thought about using our home for a B&B but I can't get my husband to agree-
     
    40th Wedding Anniversary if we make it that long
  10. donfairplay

    donfairplay High-Roller

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    What's the tax question?

    There is a $250,000 tax exemption ($500,000 if married filing jointly) if you sold a house you lived in for at least 2 years, or if you lived in the house for 2 years out of the past 5 years. And you can keep reclaiming the gain exemption every 2 years.

    https://www.irs.gov/taxtopics/tc701.html
    http://www.nolo.com/legal-encyclopedia/the-250000500000-home-sale-tax-exclusion.html

    Also, iirc, Portland is considering rent control throughout the entire city because of the hot housing market and rising rents.
     
    Last edited: May 23, 2017
  11. CaptCampion

    CaptCampion High-Roller

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    Maybe I don't really have a tax question. Our mortgage guy reminded us of your 250k point.

    But yeah, I could move every 2 years. I know from a financial standpoint that might make sense but I can't bring myself to do that to the family. Or myself.

    Has anyone here picked up a property in another state, and lived there part-time?
     
  12. HoyaHeel

    HoyaHeel Grammar Police & Admin

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    My in-laws & husband own ~40 rental properties. It's a pain in the butt but lucrative if you can do all the maintenance yourself. If you have to pay (and esp pay a property management company) you lose most of the profit (the finances are different if you're dealing with weekly vacation rentals, of course - I'm talking regular rentals in a small town in the south).

    My in-laws also own properties they live in - 3 total - and their "retirement" seems to be flipping some of the properties. They've done 3 in Costa Rica and I'm not sure how many in Florida. They haven't changed their primary residence, though, so the capital gain exemption doesn't apply - they just keep buying more rental properties.

    One thing they do NOT do is rent out AND live themselves in a property. One thing I have in common with my in-laws - we don't like to share ;-) They just constantly move among their houses, wherever they like the weather best and wherever they have an upcoming doctor's appt ;-)
     
  13. CaptCampion

    CaptCampion High-Roller

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    We currently have a college student living with us (there's a private college about a .9 mile walk from us). Her rent pays 1/3 of our mortgage. She's downstairs with a separate entrance, and we can go days without seeing her. So that's working out well.
     
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  14. CaptCampion

    CaptCampion High-Roller

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    And I'm a musician. So changing a light bulb is pretty much the extent of my handyman capabilities. I can't do shit
     
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