I have a question about the sale of my primary home that has been rented for the last year. I lived in the home for 2 years and it was my primary home. Had to move out of state due to work. I was not able to sell it as the summer market had passed so I have rented the place out for the last year. I am now looking to sell it as it is a negative cash flow property and for other reasons.

The market for the area is not the same as it was when I bought it and prices have either stayed the same or dropped. The property needed major rehab when I moved into it and I spent $75k at that time to make it livable for my family and I. I had my realtor come up with comps and in her opinion (she is very experienced in the market so I trust her), based on the expected sale price and taking into account the purchase price, realtor commission, closing costs and initial rehab costs, I stand to loose between $50-100k. This is even though the final sale price will be higher than the purchase price.

My questions revolve around mitigating losses on this property.

1.Can you, would you or do you have to take depreciation for the year that it was rented? It was my primary residence 2 out of the last 5 years.

2. Am I able to deduct the loss against other income? I have passive income from other real estate and plan on carrying forward any non deducted losses.

3. What else can I do to mitigate such heavy losses besides just waiting till the market improves? The property will bascially never be a positive cash flow or even break even based on market rents and property management costs.

Sale of Primary home being used as a rental

Most Popular Reply