• Home
  • About
  • Our Listings
  • Search Homes
  • Mortgage Calculator
  • Blog

ReferralRealty.US

Serving Raleigh, Durham, Chapel Hill & The Triangle

ReferralRealty.US – North Carolina Homes

Browse All Homes for Sale in Raleigh and Surrounding Areas

Best move regarding my rental property

July 22, 2011 by PeterGreijn

I own a rental property that isn’t making any money. My AGI is too high to be able to deduct the losses I’m incurring from it. Any ideas on what I should do?

The property is a townhouse, and was purchased new in 2004. Cost was ~$ 150K. The mortgage was a balloon ARM. I lived in it until 2008. I tried to sell it, but best offer was $ 120K so I kept the property and started renting it out. I hired a property manager.

In 2009, I refinanced the mortgage, a 30 yr fixed at 5.875%. The bank charged a higher rate because it was an investment property.

In 2010, I earned $ 10700 in rent. My costs were: mortgage interest $ 6400, depreciation $ 4400, association fee $ 1300, property tax $ 1900, property manager fee $ 750, liability insurance $ 160, other misc costs such as repairs, maintenance, etc $ 190. My overall costs were $ 15100, so I lost $ 4400 on this rental property in 2010. My losses in 2008 and 2009 totaled $ 7400.

I currently owe ~$ 107K on the mortgage.

My AGI in 2010 was ~230K and will likely stay the same or slightly increase in years to come.

Should I sell the rental property? I’m not sure what I could sell it for in this market, but I’m guessing it could fetch at least $ 120K. I doubt I could sell it for more than what I paid ($ 150K) anytime in the next 10yrs. How would the depreciation and the sell price affect my taxes after I sell the property?

OR, should I pay off the mortgage, and start earning income on the property? I have enough cash to pay off the entire mortgage right now. Paying off the mortgage would result in about $ 2K income per year from the rental property. Can I deduct previous years’ losses against this income?

OR, should I just continue as is, losing money on the property every year? Is there any advantage to this? Should I refinance again? Since I last refinanced, rates have come down even more, and maybe if I shopped around more, I could get a better investment property rate. But there are always refi costs (not only dollar amounts, but significant amounts of my personal time).

Another question:

I stated on my 2008, 2009, and 2010 tax returns that I did not actively manage the property, so I did not deduct any of the rental property losses off my personal income. Had I stated that I was actively managing, in 2008 and 2009 I could have deducted some or all of the losses off my personal income. My 2008 AGI was $ 52K, and in 2009 it was $ 110K. In 2010 my AGI was too high to matter if I was actively managing the property or not. I’m not sure what it means to be actively involved or not. I approve the rental rate, the tenant, and any major expenses. I pay the mortgage, association fee, property tax, and liability insurance. Otherwise my property manager takes care of the rest. Am I actually actively involved in the property management? Should I amend my previous tax returns to get some money back? My job is in health care, not related to real estate at all.

Thank you so much for any input!
BiggerPockets Forums

Filed Under: Investing Tagged With: Best, move, Property, regarding, Rental

Be Social – Follow Us

  • facebook
  • twitter
  • instagram
Request a FREE Foreclosure List
Foreclosure Subscription
Click on this Link or Photo to SUBSCRIBE

ReferralRealty.US LLC

For more information Phone:919-422-9677  Or, click here to: E-mail Peter. 

Company Social Resources
ReferralRealty.US, LLC
208 Bayleaf Dr,
Raleigh, NC 27615

 

 

Under Construction

Copyright © 2021 · AgentPress Pro on Genesis Framework · WordPress · Log in

The data relating to real estate for sale on this web site comes in part from the Internet Data Exchange™ Program of the Triangle MLS, Inc. of Cary. Real estate listings held by brokerage firms other than ReferralRealty.US, LLC are marked with the Internet Data Exchange™ logo or the Internet Data Exchange™ thumbnail logo (the TMLS logo) and detailed information about them includes the name of the listing firms. Listing information is deemed reliable but not guaranteed. This web site is monitored for signs of third party scraping and any use of search facilities of data on the site, other than by potential buyers and sellers, is prohibited.