Rental losses for accidental owner

[Vip Anand]

Hello,

I bought a new primary last year and rented my earlier home as I am able to cashflow $200 per month (this is thanks to 3% interest rate). If I sold the unit today, I will walk away with $100K in profit after agent commission etc.

Given I cannot offset rental losses ($26K) against W2 (not a RE professional), any advice re: thoughts below:

1) sell the rental in the next 3 years (under the 5 year and 2 as a primary occupant) to avoid Capital Gain. Does this make $26K in rental losses go to waste aka I get 0 benefit taxwise as a landlord? What is the point of holing on to my rental if there is no benefit whatsoever?

2) should I buy another rental down the road and if so how would I use the rental losses from rental property 1 towards rental property 2? Wouldn't rental property 2 generate its own loss due to depreciation? 

Thanks. I just need to figure out if I should sell my rental now given I dont understand how it benefits me at all.

[Vip Anand]

Quote from @Account Closed:

Quote from @Vip Anand:

Hello,

I bought a new primary last year and rented my earlier home as I am able to cashflow $200 per month (this is thanks to 3% interest rate). If I sold the unit today, I will walk away with $100K in profit after agent commission etc.

Given I cannot offset rental losses ($26K) against W2 (not a RE professional), any advice re: thoughts below:

1) sell the rental in the next 3 years (under the 5 year and 2 as a primary occupant) to avoid Capital Gain. Does this make $26K in rental losses go to waste aka I get 0 benefit taxwise as a landlord? What is the point of holing on to my rental if there is no benefit whatsoever?

2) should I buy another rental down the road and if so how would I use the rental losses from rental property 1 towards rental property 2? Wouldn't rental property 2 generate its own loss due to depreciation? 

Thanks. I just need to figure out if I should sell my rental now given I dont understand how it benefits me at all.

 1) I would not say the rental losses are going to waste, since even if they are passive they can carry forward and offset other passive gains in the future. 
2) They game of real estate is "buy, borrow, die" and it sounds like you are in this property for a good rate. Perhaps wait it out if you can, that profit will only get larger with time. If you need the money urgently you could consider a heloc which may have a more favorable rate. 

 Thank you, Zachary. Your feedback make sense.

1) I am in the North east so buying more doors is an arduous task so I don't plan to be a RE investor with many doors (because I won't have enough money).

2) Other reason is that even if I somehow got another rental, chances of making positive cashflow given current prices/interest rates is remote (especially given I am not a seasoned RE investor).

3) I don't have an urgent need for money.

Given these three points, I don't know what passive profits would I apply my rental loss of $26K against...unless you can think of a way I can use this loss to ease my way into an additional rental.

Else, I agree, I can hold onto the rental for as long as I need to and then sell and use the loss then.

Thanks for the guidance!