Wino
Senior Member
Cash: $ 113.80
Posts: 560
Joined: 03 Aug 2012
Location: Dubai
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I just looked on Zillow to see what my Houston house is worth. Long story short, we can probably take a minimum of $150K out of the house by selling it. After running the figures in Excel, if I make only 7% per annum on average with the profit, I stand to make more by investing the money than by renting out the house. Still, 7% per annum is not a bad return, especially if the value continues to increase.
So, now it looks very much like we'll be selling the Houston house. We saw a Zillow-listed house smaller and in worse shape than our place with a pending contract; it sold for enough that we could take $180K out of the house we now have. The $150K amount above is conservative, as I prefer my surprises to be on the good side.
The above figures include everything except depreciation. I'm reading up on that now, but if anyone can tell me how depreciation on a rental property works for tax purposes, as well as how I can write off the expenses that go with a rental property, I'd be obliged. Right now, we're letting DD2 live there with her husband. Their "rent" doesn't even cover taxes and upkeep, so there's no lease and we're "living" there as far as income is concerned. They get a place for less than the going rate, and we have "tenants" who are keeping the place in good shape (mostly).
Texas is a no-income-tax State, so I only pay (exorbitant) property taxes, in case that matters for the depreciation and write offs are concerned..
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Sun Mar 17, 2013 9:12 pm |
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oldguy
Senior Member
Cash: $ 751.85
Posts: 3656
Joined: 21 May 2006
Location: arizona
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quote:
but if anyone can tell me how depreciation on a rental property works for tax purposes, as well as how I can write off the expenses that go with a rental property, I'd be obliged.
Divide the value of the improvements (but not the ground) by 27 1/2. That is you annual depreciation deduction. Eg, if house $150k, you depreciate $5454/yr, in your bracket, that probably gives you a $2000/yr tax break, ie about $160/m (extra income). The good part of depreciation is that it is 'virtual', you don't spend that money. Other deductions are interest, insurance, prop taxes, repairs, utilities, management fees. etc. About everything except the principal portion of your mortgage. (But unlike depreciation, you have to spend it to deduct it.) Furthermore, when you sell, the IRS counts everything that is deprciated or depreciable - so don't skip depreciation on the assumption that you don't have to repay depreciation tax later.
BTW, you've already broken the First Law of Landlording. Never rent to an aquaintance, a co-worker, a co-worker's kids, a friend, and never ever to a relative, always have an arm's length formal agreement with a stranger.
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Sun Mar 17, 2013 11:29 pm |
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Wino
Senior Member
Cash: $ 113.80
Posts: 560
Joined: 03 Aug 2012
Location: Dubai
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I'm not yet renting it. If I were to rent it, I'd want to make a profit. I am letting my DW and her husband live there. There's no lease, because all they're really paying is utilities, etc.
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Mon Mar 18, 2013 2:31 am |
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