I bought the house next to me in a quiet sub near a mariina in holland mi. Im currently renting to a lady whos lease is up in Jan. Her rent is 850. My payment is 637 which includes taxes and i nsurance but in January will rise due to non homestead taxes, which will up my escrow and the payment will be 750. now the renter cannot afford the 850 rent because her live in moved out. so I told her she could rent til April for 640 plus Id take 210 out of her deposite each month to make up the difference, this will only get her til april, which would bring me too spring time when I feel I could rent it out easier. But I had to borrow on my home for the down payment so im not making enough to pay that either. My question is, would it be better to break even on the house and reduce the rent to her in april to 750? she is a great renter and it is a 3 bedroom ranch but the septic probably wouldnt hold a full family in there. house was built in 1959 and the septic never was replaced yet but works fine. or should i just sell it and break even. my intention was to keep it for 5 years until one of my kids could take over, there14 and 16.
Also im now in a different tax bracket since my income has increased due to the rental payments, is there anyway I can increase the deduction since we do all the lawn work and have recently began to snow plow now too. how do you figure that, by the hour or by the basic costs? Im beginning to think this was a mistake. ive put 10000 into it already to make it livable,painting, siding, new copper piping, new tiled bath, new refrig ect
You’re only showing a positive cash flow of $200 a month now your tax bracket wouldn’t change much on 2400 a year income. Now, you can also deduct any maintenance that you’ve paid on that house in addition to your Interest and Tax expenses. Most of the time, if a property is barely cash flowing the true cost of ownership can zero out a lot of the income.
That being said, it boils down to what can you sell it for versus what you owe. If you can make a profit versus breaking even then unless your area is appreciating rapidly, it’s likely a stronger option to sell.
You cannot, however, deduct maintenance that YOU perform yourself - like yard work and snow removal.
You can deduct:
Advertising
Auto & Travel
Cleaning & Maintenance
Commissions
Insurance
Legal & Professional Fees
Management Fees
Mortgage Interest Paid to Banks, etc.
Other Interest
Repairs
Supplies
Taxes
Utilities
Others
Depreciation
Keith
Can you claim lawn care by the hour or can I only claim the gas? I would think you could claim the lawn care, I do day care and claim that at year end, fertilizer, gas etc. Also I could sell it and it would be a wash, no profit but not losing anything either, homes are apreciating about 3 percent a year here but they sell within 30 days because of the location. bought for 112000 and would sell it for 129000. but then of course I would have to claim the profit minus all the deductions, I would be in the hole. Just doesnt make sense given the non homestead tax to keep it. used to get 4000 back on income taxes now I get 300.
If you do the lawn care yourself, you can claim the gas…if you hire a lawn service, you can deduct that cost. But, the lawn service cannot be you.
Keith
Look at it this way. If you were to try and claim your time as part of the cost, you would then have to claim that as income on your tax returns. It wouldn’t help anyway. If you pay yourself $100 an hour to mow lawns (because you are the BEST LAWNTECH in history) and it takes you 2 hours then you would have ‘paid’ yourself $200. Then of course, since the IRS requires that you report all of your earnings, you would have to claim $200 of income from your lawn service.
Since it wouldn’t serve any purpose other than creating a more complicated tax filing, the IRS has simplified this by stating that you can’t pay yourself for your time. (This would be entirely different if your property were held in a corporation, but that’s a whole different animal).
ok i understand what you are saying. My purpose for owning this home is for future use, say five years, only want to break even is all. Given the interest rate is 5.87 which in my opinion will not come along again any time soon, thought maybe my teenager would take it over then at that rate. is that possible to do? or ill just sell it in five years. We were in the 15 precent tax bracket now we are in the 25 precent tax bracket which is a big difference to us, must be right on the border…another question I have is can you hold a land contract before the mortgage is paid off?I heard your bank will not allow this.
Your teenager would pay the almost $3000 per month payment? Overall seems like a deal very very likely to lose money.
My teenager will be 21 in five years, so what im saying is he might want to buy at that time, if not I will sell it, right now the payment is 497 with out escrow, if he wanted to take over the payment in five years at 5.87 percent , just wondering if the banks allow this. where do you get 3000 ?
Not sure where I got that number. Disregard my comment, apparently I was off in La-La land when I responded.
…smoking some bad dog food!
LOL…
Keith
Are you taking depreciation? That should get you out of the higher tax bracket by itself.