Last year we sold our rental property. It was a perpetual headache and then some. That damn property caused me MANY sleepless nights and my first gray hairs.

When we did our taxes the stupid rental property finally yielded something positive. It lost a ton of money and was ONE HELL of a tax shield. When my tax specialist showed me our return my jaw dropped. Holy tax shield batman! It almost made the whole land lord experience worth it....almost.

Depreciation is your friend!

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Originally posted by midwest guy:
Depreciation is your friend!

Not when you sell it isn't. It's called ordinary income on depreciation recapture.

good for you that you got something good out of it.

And, although I'm sure your tax specialist is correct, I'm just not clear how you lost a ton of money on the house in the year that you sold it.

You should have gotten the tax benefits over the years you owned the rental property from depreciation and any maintenance costs associated with it.

I'm not sure if you are allowed to net out mortgage interests you paid on the rental property against the income or if you're supposed to have just claimed the interest as a tax deduction on Schedule A.

For you to have lost money on the rental property in the year you sold it, meant you must have sold it for less than what you bought it. In that case, you did lose "real" money. Normally, rental properties actually incur taxes because the book value has been depreciated over the years versus the selling price.

But in any case, I'm sure you're glad it's out of your hair now.

i'm in the same place as you.

Together, my wife and I grossed above 160k.

After taking the loss (about 100k as well) on the damn rental place we sold last year, AGI is about 50k. Kind of a ridiculous refund this year lol!

quote:

For you to have lost money on the rental property in the year you sold it, meant you must have sold it for less than what you bought it. In that case, you did lose "real" money. Normally, rental properties actually incur taxes because the book value has been depreciated over the years versus the selling price.

That's exactly what happened for me. Bought right before the housing bubble burst. Paid $330k, sold for 230k. In the meantime, I had been taking a small loss each month on rent vs. mortgage; for a while it didn't matter because i was trying to play the long game, but it became untenable and we had to get rid of it.

Would I have preferred to have not lost anything at all on the property? Yes, but this certainly softens the blow.

Sure the years we owned it we did get some tax breaks but last year it sat vacant for months and my last tenant caused about $8k in damage. Add up the damage by my professional dead beat tenant along things that we needed to fix prior to selling it as well time it was vacant and it yeah, it was bad.

For years we have considered the prospect of owning a vacation rental house at the outer banks of North Carolina. I know it is quite a bit different from a rental property with weekly rentals vs having a long term tenant but this last process soured us to any form of a rental property

I do sometimes wonder if a vacation rental were managed by a good company would the experience would be different?

quote:

Originally posted by stickman428:
Sure the years we owned it we did get some tax breaks but last year it sat vacant for months and my last tenant caused about $8k in damage. Add up the damage by my professional dead beat tenant along things that we needed to fix prior to selling it as well time it was vacant and it yeah, it was bad.

For years we have considered the prospect of owning a vacation rental house at the outer banks of North Carolina. I know it is quite a bit different from a rental property with weekly rentals vs having a long term tenant but this last process soured us to any form of a rental property

I do sometimes wonder if a vacation rental were managed by a good company would the experience would be different?

Yes, it would be different but just as bad, or worse. Instead of one irresponsible tenant every few years, you would be getting them every week.

San Diego has a lot of vacation rentals, and I got a peek at that, a fairly thorough peek. You furnish everything, silverware, plates, pots and pans, coffee maker, sheets, towels, etc. A lot of the rentals are close to the beach, and it is astonishing how much sand is left at the beach after seeing how much of it ends up in the rental unit. People pay a fortune to rent these places and feel like everything must be perfect, your fault if not. A good management company will cost so much that the profit is likely to be elusive.

quote:

Originally posted by stickman428:

....For years we have considered the prospect of owning a vacation rental house at the outer banks of North Carolina. I know it is quite a bit different from a rental property with weekly rentals vs having a long term tenant but this last process soured us to any form of a rental property

I do sometimes wonder if a vacation rental were managed by a good company would the experience would be different?

As someone who owne's rentals myself I would say no. We were at Nags Head last month (in a rental home) and I thought about buying one somewhere on the Outer Banks myself but promptly ruled that out. There are so many negatives (ocean property insurance and maintenance, ridiculous management fees, property tax, etc.) The *only* way I might even consider buying property like this would be when the market is completely depressed, such as it was in 2008, then flip it in a few years when it recovers.

But if you do happen to buy there send me a PM because I could be interested in renting for a week or so in the Spring of Fall! And it wouldn't be "on the books".