Renting out your home?

[Mr._johngalt]

Anybody knows how does it work when you tear down the entire thing? Can the whole house be depreciated instantly since there is no house left?

Vicky

It seems to me, yes. Anything else would be illogical. Dr. Spock?

JG

 

[kcowan]

Anybody knows how does it work when you tear down the entire thing? Can the whole house be depreciated instantly since there is no house left?

Well I think you need rental income from it for the depreciation to have any value. It might be tough to convince the IRS that someone is renting your lot...

 

[simple girl]

Well I won't quit my job until I can afford to live right where I am now. We like it here and we don't really want to take a flier on moving to what we hope will be a lower cost area just to speed up the retirement process. I fear that after we've picked up and moved, we might wish we hadn't.

But regardless of whether we can afford to live where we do, I can't help but think we'd have a higher standard of living and more financial security if we lived somewhere else. And besides, who's to say we wouldn't like someplace else better? We'd also like to try living overseas for a while. Maybe one of those places would stick and we wouldn't have to worry about coming back but we'd also like the option of returning to a place we know we like.

So the idea of renting out our place and exploring other environments has some real appeal.

Ah, I think I understand. So you want to check out other areas (keeping your NY place) - not to help you FIRE earlier - but just to see if you like another area better, without giving up your foothold in NY?

After hearing the other posters talk about the caveats with renting out in NY specifically, I would be a little more leary of renting out my place...however, I wouldn't rule it out. Maybe there are safer options? Like the one poster said, perhaps you could rent it out as a vacation rental? Check this out: http://www.vrbo.com/vacation-rentals/usa/new-york/new-york-city If you didn't want to manage it yourself you could find a property management company. Vacation renters aren't long term tenants, so eviction is not an issue. The issue would be not knowing exactly how much $$$ you'd have coming in as you can't predict your vacancy rate 100%.

Or, could your place be set up as a corporate rental

 

[kcowan]

Is your place in The City or one of the boroughs?

 

[spideyrdpd]

I agree with the person that said post this on mrlandlord.
The issue your discussing isnt eviction. Your saying once the lease ends the person wont leave. Your probaly just going to have to pay a fee to have the sheriff come and remove the person. I am not sure why/if this would be different in NYC.


As far as it being a good or bad idea that a whole big can of worms. If this is your primary residence you get the 2 yrs to keep the tax exclusion. As metioned you have to depreciate a rental. Its not that big a deal. You get to write it off today and then have to pay it back when you sell. You can 1031 investment real estate and continue to delay taxes. This costs about 1k and you have lots of rules. Which means its not for everyone.

For many people the obvious option is to get a property manager. They would handle finding a tenant and referring a lawyer to do evictions if needed. Most take 10% of the rental fee and they often take 50% of the first months rent.

I find the biggest problem is that most people get emotionaly attached to real estate . Especially if its some place that you have lived at. The best real estate investments always seem to be some place you have never lived

 

[mathjak107]

if the lease ends here in nyc or the 5 boroughos and they dont get out you still need to go to court and start eviction preceedings. tenents without leases have an implied lease by the state , its the same implied lease if you choose not to give a tenant a lease but go month to month. and it must be court ordered to evict them. 3-6 months lost for this process.....

"MURPHY IS ALIVE AND WELL WHEN YOU RENT PROPERTY TO SOMEONE "

 

[mathjak107]

To give you an idea how bad landlords hate rent control and rent stabilization there was a loop hole in the law that a bunch of unscroupulious landlords and their lawyers found that gave a landlord the right to evict a tenant for the following. its so unethical that my son who was doing an internship for his law degree had to go to a meeting of judges to listen in about what to do about the fact that legally they were forced to order the evictions even though they were un-ethical.

this is how it works. you know how leases talk about how you cant modify or alter the property? well the landlord waits until say a lighting fixture breaks, he then dosnt respond to the tenants call to repair it, or the tenant changes it on their own...

that is an un-authorized modification and grounds for eviction. tenants cant legally change even a light fixture.

if the landlord didnt respond to the repair the tenant legally needed to go to housing court to get an order to fix it on their own and bill the landlord. if they dont judges have to uphold the eviction process.

i hate these rent stabilization laws too but this is really slimey for landlords to do. i have a standing offer to my tenants in a building where we own some apartments overlooking central park south. anyone who signs a rent termination agreement gets 50,000 bucks..

so far out of 9 tenents 5 took advantage allowing us to sell them for big bucks.


god bless nyc

 

[MooreBonds]

Another real estate investment question - if you own rental property and depreciate it, then die....does the property's market value become the heir's new cost-basis, does the estate pay taxes on the difference between the depreciated value and the market value upon death, or does the property's depreciated value become the heir's cost-basis?

 

[mathjak107]

depreciation is whiped out when inheirited

 

[farmerEd]

Not a landlord here, and don't wish to be one, but IF you wanted to lease out your primary house and make sure you got it back, couldn't you write into the lease agreement an automatic rent escalation that takes place in month 13 (assume you wanted to rent it out for 12) that jacked the rent amount from $xxx to something like 5 or 10x $xxx but gives the rentor the option to "opt-out" of the lease in month 12? For example, regular rent is $2000/month for 12 months, you want the house back in a year so the lease states that the rent goes up to $20,000 per month in month 13? I can't see where a rentor would hesitate to sign this if they truly believed in leaving at month 12...would something like that hold up? If they choose to stay...then that wouldn't be so bad either...

 

[Mr._johngalt]

Not a landlord here, and don't wish to be one, but IF you wanted to lease out your primary house and make sure you got it back, couldn't you write into the lease agreement an automatic rent escalation that takes place in month 13 (assume you wanted to rent it out for 12) that jacked the rent amount from $xxx to something like 5 or 10x $xxx but gives the rentor the option to "opt-out" of the lease in month 12? For example, regular rent is $2000/month for 12 months, you want the house back in a year so the lease states that the rent goes up to $20,000 per month in month 13? I can't see where a rentor would hesitate to sign this if they truly believed in leaving at month 12...would something like that hold up? If they choose to stay...then that wouldn't be so bad either...

I can't tell if you are just messing around.
First fo all, only a complete fool would sign such a lease. Secondly, if they decided to ignore other
provisions, they would ignore that one as well. Apologize if you were
just making a subtle joke.

JG

 

[farmerEd]

I'd sign that lease if the landlords told me they only wanted to rent it for 12 months, and I only wanted to rent it for 12 months...why would I care what the rent was in month 13 if I promised to leave in 12? If someone refused to sign that, it would tell me that perhaps they didn't intend to leave after 12 months anyway.

I wasn't making a joke, but as I said, not a landlord and don't even want to play one on TV.

Perhaps you could even spell out in the lease that "it is the intention of both parties that this rental period will not exceed 12 months, however, if the lessee wishes to remain beyond the date 12/31/2007 then the monthly rent will increase to $20K/month...just trying to put a huge financial incentive into the lease to get people out when they say they would...would that pass legal muster? I have no idea...

 

[tryan]

A common problem I've seen is landlords raising the rent above market to get a vacancy to facilitate a sale. Judges here have thrown out the increase and forced the tenant - and landlord - to accept only market rents.

Also tried evicting at the end of a lease period - to facilitate a sale - and was told by the judge "I will not make a family homeless to facilitate a sale". Posession is 9/10's of the law.

 

[kcowan]

Our friends just got back from 2 weeks in NYC. They rented a 2BR/2Bath apartment with a balcony right at the southwest corner of Central Park. They were in an owner-occupied suite. The owner just went to their country home for the 2 weeks.

This looks to be the painless way to leave and experience someplace else without the hassle of having a full-time tenant.

 

[MooreBonds]

Okay....my last question on the topic.

I've searched the IRS website, and find plenty of references to turning your residence into rental property. HOWEVER, I can't find any info on what to do if you turn a rental property into a primary residence.

In the year immediately following your last year of rental, do you mark-to-market your house value, subtract the depreciated value, and pay 25% recapture on the difference? Or do you wait until you sell it to figure out what % of the cap gain is from depreciation?

 

[mathjak107]

good question, my ex wife is doing that right now...

ill guess and say when you sell its recaptured but im not sure

 

[Nords]

In the year immediately following your last year of rental, do you mark-to-market your house value, subtract the depreciated value, and pay 25% recapture on the difference? Or do you wait until you sell it to figure out what % of the cap gain is from depreciation?

You would think that the IRS would have taken someone to tax court on this by now. I've seen plenty of articles advocating serially living in your rental properties for two years each, selling them and moving into the next, and taking $500K cap gains tax free. Depending on the basis of your home and its depreciation, the gain from depreciation may be less than $500K and the whole question may be moot...

 

[Martha]

Okay....my last question on the topic.

I've searched the IRS website, and find plenty of references to turning your residence into rental property. HOWEVER, I can't find any info on what to do if you turn a rental property into a primary residence.

In the year immediately following your last year of rental, do you mark-to-market your house value, subtract the depreciated value, and pay 25% recapture on the difference? Or do you wait until you sell it to figure out what % of the cap gain is from depreciation?

You wait until you sell. At that time, you will have to pay the 25% tax on the recapture. You cannot shelter the tax on the recapture with the $500,000 exemption, but you can shelter any of the non-recapture capital gain.

 

[mathjak107]

nords i have to agree with you, im not so sure once it stops being a rental and its sold years down the road as a personal residence that the prior depreciation may just get lost in the shuffle as long as the capital gains are under the limit. of course i wouldnt want to be the one to test this out ha ha ha

 

[Gone4Good]

Also tried evicting at the end of a lease period - to facilitate a sale - and was told by the judge "I will not make a family homeless to facilitate a sale". Posession is 9/10's of the law.

Any precedent for a landlord who wants to evict so HE can live in the apartment? The judge's choice being to make either the lessor or the lessee homeless?

 

[tryan]

Absolutely a bias in favor of owner occupants. They can even avoid the MA lead laws by not renting to people with kids!

 

[mathjak107]

Any precedent for a landlord who wants to evict so HE can live in the apartment? The judge's choice being to make either the lessor or the lessee homeless?

we took an apartment back for my son.. it was very tricky as far as the laws. the notice had to be by a certain date to make it effective by a certain date. a process server had to be used and an attorney hired.

the wording had to be very careful and had to state we owned no other property for my son to live in.

when all was said and done if the tenant didnt get out you still had to go to court to get an eviction notice..

if the apartment is rent controlled or rent stabilized than you cant even take it back for yourself or family member

 

[MooreBonds]

we took an apartment back for my son.. it was very tricky as far as the laws. the notice had to be by a certain date to make it effective by a certain date. a process server had to be used and an attorney hired.

the wording had to be very careful and had to state we owned no other property for my son to live in.

when all was said and done if the tenant didnt get out you still had to go to court to get an eviction notice..

if the apartment is rent controlled or rent stabilized than you cant even take it back for yourself or family member

So what happens when you want to, say, remodel the apartment? Do you have to find another place for the tenant to live, then guarantee them an apartment to return to once you finish remodeling?

 

[mathjak107]

to tell you the truth i dont know anyone who remodeled a rent controlled apartment to the point a tenant couldnt live there but if you did you would have to pay for lodgeing for them.

 

[mathjak107]

we took an apartment back for my son.. it was very tricky as far as the laws. the notice had to be by a certain date to make it effective by a certain date. a process server had to be used and an attorney hired.

the wording had to be very careful and had to state we owned no other property for my son to live in.

when all was said and done if the tenant didnt get out you still had to go to court to get an eviction notice..

if the apartment is rent controlled or rent stabilized than you cant even take it back for yourself or family member

correction i re-read the rent control laws and yes you can go to court and try to get the apartment back for yourself. its easier to get a rent stabilized then rent controlled apartment back though.

either case unless the tenent gives up the apartment willingly it will take a court order.

all dwellings over 6 family in our city are rent stabilized