All Forum Posts by: Bilal A.

Hello BPers,

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.

Thank you in advance!

Bilal

@Janelle Groenhout I hope it has a massive impact. Looking forward to seeing how it changes my 2018 tax return.

@Andrew Johnson I lived in the Bay Area for a year. That was enough for me to realize that I will never be more than just a CA tourist in the future. 

@Dmitriy Fomichenko @Jonathan R McLaughlin @James Kojo Thanks for tips. Points well taken!

@Justin Goode I have read most of that good and it has opened my eyes to a few things like the sandwich technique. Wish I could do the Solo 401k but that will have to wait for the future. 

@Ola Dantis Thanks! Will check it out.

@Laith Ali I agree with you. Why most of my colleagues are OK with giving away half their hard earned sweat money (Spending endless hours away from their young families and giving up sleep) is beyond me! 

@Caleb Heimsoth I vaguely read about conservation easements in another post and never bother to look into it more. Thanks for the tip! Will definitely look into it more.

@Erik Cabral @Ashish Acharya

Great tips! A lot of those help with not paying taxes on rental income and I will use them even more once my portfolio increases. I especially love the one of being able to pay your kids! Will definitely max that one to the fullest extent. 

Except for a few tips, I am not sure if I can use them to reduce my W2 income by a substantial amount.

@Krystal Goode working my behind off and saving as much as possible and paying off debts has been my strategy for the last few years. But It comes at a pretty steep cost when you consider the extraordinary tax rates. I realize that reducing taxable income reduces your ability to borrow due to high DTI ratio but I guess I would rather have cash in my pocket rather borrow more money. Given the ridiculous tax rates, being able to reduce taxable income by even $100 can result in getting back $30-50 back at the end of the year. Multiply that by 10, 100 or even a 1000.... now you're talking!