Investor · Hartford, CT · Member since 2016 · 6 posts · 0 votes
We converted our primary residence to a rental in 2015 and purchased our second home which is our current primary residence.
a) Are there any specific tasks that i should do like inform our first property bank or update the home owners insurance ?
b) Are there any tax activities that needs to be taken care as i earned 4 months of rental income in 2015? What forms are we talking about ?
c)We spent around $1000 on paint and some repairs before renting out the old property. Will they be declared as expenses on the property ?
Please let me know. REI is not our full time thing but did it with self interest. Now i am a little worried that probably i missed out on anything that i was not supposed to during the process of converting primary residence to a rental.
Rental Property Investor · Cleveland, OH · Member since 2015 · 1k+ posts · 880 votes
10y
You should contact your insurance company for sure. There are a lot of cases where the insurance company will drop you if you are no longer living in the property, so making them aware that it is now a rental is always a good idea. Most insurance companies have landlord policies that are less expensive than when you and all your stuff are living there. Keep in mind that these kinds of policies do not cover your tenant or their stuff, so you want to make sure that all your tenants have renters insurance.
As for the bank, it's a double edged sword. You should let them know your mailing address and the property address are not the same. That being said, you should make sure you aren't going to trigger an alienation or acceleration clause on your mortgage by renting it out. Simply read the note and mortgage you signed when you bought the house.
When you file your taxes you will fill out a schedule E for your rental property. You will have the opportunity to itemize your expenses and income on that schedule. If you need tax advise, I'd highly recommend @Brandon Hall. He does the taxes for all my LLC's and my personal returns.
Residential Real Estate Broker · Paso Robles, CA · Member since 2015 · 196 posts · 58 votes
10y
Chaits,
Definitely contact your insurance provider as the last thing you want is a major disaster and they not cover it.
As for those repairs/maintenance items, you will want to keep track of those expenses so you can deduct on your taxes as previously mentioned by Matt.
Regarding your lender/bank, how long did you live in the home? You typically sign an affidavit when purchasing a primary residence saying that you intend on occupying the home for a minimum of 1 year.
Lastly, make sure you reclassify the property as a rental with the county to avoid any penalties. I've heard of some nasty fees imposed on people thinking they can get around the increased taxes by not classifying their rental property.
Hope this helps. Good luck!