TAXES ON PASSIVE INCOME??

[Ethan White]

Hello everyone, this is my first topic post and my question is i have bought a doublewide in a park for $800/mth mortgage "includes rent space" and am renting it out for that. Owners insurance is still covering it. It's within 20 miles of my personal home....

What kind of taxes should i prepare myself for, and are there legal loopholes i should be aware of and/or take advantage of?

[Dave Toelkes]

Taxes you should budget for include personal property taxes on the DW. Income tax returns will become more complex if you have never owned rental property.

As a general rule, just renting for the amount of the loan payment plus ground rent is not going to give you a positive cash flow. Hopefully, your loan term is short enough that you will overcome this obstacle to profitability quickly. Until then, I would not expect you to have any additional tax due as a reeult of your rental activity.

My caution for you is that the former owner's insurance is worthless now that the seller is no longer on title. The former owner does not have an insurable interest any more and any claim you might try to file under that insurance policy will be denied because you don't have standing to file a claim.

If your tenant sues you, the seller's insurance company won't defend you and won't cover any judgment that may be awarded.

Get your own insurance in place right away, especially before you get a renter in place.