WWYD? Rent out townhousevor unload it.

[Anonymous]

My husband and I bought a town home for $330000 at the height of the market in 2005 in montgomery village, md. Houses in our neighborhood are listing now In the $200,000-$250,000 range. I am anticipating receiving a job offer in Annapolis, MD, which would require us to move. We have about $240,000 left on the mortgage. We have about $80,000 in savings, $270,000 in our retirement accounts and our son's college is paid for. We make around $175,000 which would go down to $165,000 if I took the new job. Should we just cut our losses and part with this money pit.... Or consider renting it out? The neighborhood pretty much went downhill during the second year we lived there.

[Anonymous]

Get rid of it, just make peace with the fact you're going to lose some money, sell, and move on. No way do you need the stress or expense of being a landlord in MV while living in Annapolis.

[Anonymous]

I suppose it depends on whether you'd make money renting it for a while, especially if you had a management company deal with renting it. The Annapolis market is not moving as fast as the desirable DC markets, so I don't think there's a huge opportunity cost to waiting to buy out there.

[Anonymous]

We were in the same position (also MV) and went with the unloading option. We bought in 2004. It sucked, but we were going to lose on renting and needed out of the money pit.

[Anonymous]

Rent it out

[Anonymous]

You have to run the numbers on renting it, which includes factoring in a professional management company to manage it (to take stress off you), the tax consequences, etc.

[Anonymous]

You'll also need to figure out what mortgage you'll be approved for - I dont know personally, but believe that you have to qualify for both your TH mortgage and your new house mortgage, since you dont have a history of the rental income, that won't be taken into consideration.

Your $80k in savings will help with that (assuming you'll use a good chunk of it for a downpayment), but you'll ave to run the numbers

(i'd be curious what you find - we're in a similar situation and are probably going to cut our losses)

[Anonymous]

You should be aware because you make more than 150k you will not be able to write off any of your rental loss on your taxes. The irs considers a rental loss a tax shelter. This goes for repairs, depreciation, whatever. The losses can only be used at the sale of the rental property. My advice is to sell if you can. Its not worth thw headache unless you think prices will double in a few years.

[Anonymous]

Anonymous wrote:You should be aware because you make more than 150k you will not be able to write off any of your rental loss on your taxes. The irs considers a rental loss a tax shelter. This goes for repairs, depreciation, whatever. The losses can only be used at the sale of the rental property. My advice is to sell if you can. Its not worth thw headache unless you think prices will double in a few years.

I don't think this is right. You can still deduct expenses like repair and maintenance against your rental income. There are limits to deducting losses from rental activity against your non-rental income, but I don't think it's correct to say you have to pay all the taxes and can't take any of the deductions.

Anyone know who's right and who's wrong here?

[Anonymous]

You need to ask yourself if you would rather part with $50,000 or more out of pocket if you sell on the low end (your cost to sell could easily be $15,000 in commission, closing costs and fix up costs) or deal with renting it out. For me it would be an easy choice I would have a really hard time parting with $50K or more out of my 80K savings. Renting is not that hard nor difficult and you could manage it yourself from Annapolis. It may not be ideal but certainly doable.

[Anonymous]

we chose to cut our losses, didn't want to be landlords in a flat market.
though I will add, renting out an underwater property and then selling, let's you shelter the "business loss" on your taxes.
also agree, consider FSBO. the 6% REALTOR fees are cannibalizing their very own market.

[Anonymous]

You would've paid anywhere between $150-170k in rent in the same time period. Think of it as rent - you paid and had a roof over your head.

[Anonymous]

Best of luck selling the place! I am saying that sincerely.

[Anonymous]

Anonymous wrote:

Anonymous wrote:You should be aware because you make more than 150k you will not be able to write off any of your rental loss on your taxes. The irs considers a rental loss a tax shelter. This goes for repairs, depreciation, whatever. The losses can only be used at the sale of the rental property. My advice is to sell if you can. Its not worth thw headache unless you think prices will double in a few years.

I don't think this is right. You can still deduct expenses like repair and maintenance against your rental income. There are limits to deducting losses from rental activity against your non-rental income, but I don't think it's correct to say you have to pay all the taxes and can't take any of the deductions.

Anyone know who's right and who's wrong here?

I believe the most OP can deduct per year is something like 3k.

[Anonymous]

Wrong you cant deduct up to 3k on a rental loss. Its very simple, if you make over 150 k like the op you cant deduct any losses. The op would have to claim a ptofit if there was one but considering taking depreciation is mandatory for a rental it is very unlikely the op would make any profit. You are confusing the 3k capital loss rule. Rental property is considered a passive activity which the irs considers a tax shelter. Again after making 150k in agi, you cant deduct any rental passive loss off your taxes. Dont believe me use google.