Texas Landlords, sell it or keep renting it (tax implications)?

[ScottJ]

I've got a single-family home in Flower Mound that I've been renting for a while. The tenant's (which are great) are expressing some interest in buying the place from me. My Realtor said he'd charge $1k to handle the contact, transaction, etc. since buyer/seller are already acquainted.

I purchased the property in 2004, moved in and lived there until late 2008 when I moved out and started renting it, and I've been renting it since 2008.

My guess is that I'd leave closing w/ $35-40k if I sold it today.

I'm worried about my federal income-tax expense on that $35-40k, in the year that I'd sell it though (which for all intents and purposes can be considered an expense to liquidate the property).

Maybe it makes more sense for me to continue renting it, and continue writing off my yearly improvements, repairs, property tax, loan interest, etc. on my federal income tax.

Anyone here been in this situation?

$1k sound reasonable to broker the sale?




--Scott

[Sean88gt]

Maybe I'm wrong, but you shouldn't have to pay tax on that low of a "profit", I thought it had to exceed $500k on a single sale.

[ScottJ]

Maybe I'm wrong, but you shouldn't have to pay tax on that low of a "profit", I thought it had to exceed $500k on a single sale.

That's worth investigating, and FWIW I'm already poking around for information elsewhere, just thought I'd let the DFWM real estate moguls weigh in Thx for the input!


--Scott

[Snatch Napkin]

Man, I'm a sucker for figuring profits and losses. I'd say keep it, unless it is showing signs of becoming a hassle.

[ScottJ]

I think I'm stuck paying federal capital gain's tax on the gain (I expect a gain).

I have NOT lived for at least 2 years at the property (as a primary residence) in the last 5 years.

Having said that, I suppose I need to estimate what the capital-gain's tax would be on the estimated $35-40k.

[Pro88LX]

how much do you actually make on it a month(not what you report)

[ScottJ]

how much do you actually make on it a month(not what you report)

I'm @ around +$400/mo. on it right now, up from +320/mo. last year.

[GeorgeG.]

As you've already discovered, it's not your primary residence. It's an investment property, why would the IRS not want their tax cut?

[ScottJ]

As you've already discovered, it's not your primary residence. It's an investment property, why would the IRS not want their tax cut?

They would, I wonder how much I'd owe?

[Pro88LX]

I'm @ around +$400/mo. on it right now, up from +320/mo. last year.

homestly id proably keep it and try to pay it off asap. An income producing property down the road>30k in the bank.

[03mustangdude]

500k is for primary residence only.

[ScottJ]

500k is for primary residence only.

I just read that too, and I'm single, so $250k for me I believe.

[BLK306]

If you take the money made on the property and roll it in to another investment/property then you should not have to pay a capital gains tax. So if you do not have plans on reinvesting the money I would say continue to rent the place. An extra $400 a month is a nice little bump.

[ScottJ]

homestly id proably keep it and try to pay it off asap. An income producing property down the road>30k in the bank.

I see what you are saying, and I'd make that ~$35-40k (after expenses) in 8-9 years on the rental income, and still own the property. I'd have a fair bit more equity in the property in 8-9 years also.

If you take the money made on the property and roll it in to another investment/property then you should not have to pay a capital gains tax. So if you do not have plans on reinvesting the money I would say continue to rent the place. An extra $400 a month is a nice little bump.

I hadn't considered taking the funds from the sale and making another real-estate investment, but that's not a bad idea, so long as I thought the alternate real-estate investment would better position me than this existing property. The positive cash from this home has worked nicely to cover maintenance items over the years, with money left over.

I'm blessed that the tenants have done such a nice job taking care of (and improving) the place. We've done several projects where we split the costs and they provided the labor.

[Pewter Y2K Z28]

homestly id proably keep it and try to pay it off asap. An income producing property down the road>30k in the bank.

This.