All Forum Posts by: James Madison

So, repairs and maintenance are deductible as soon as I convert the residence to a rental... But I have to classify the differences between repair/maintenance and capital improvement.

It is somewhat confusing where exactly the line can be drawn... For example, I have extensive fire damage to one room. Many new materials will be needed to repair the damage. Basically, the entire room needs redone (new: framing, wiring, roof, flooring, door, windows, insulation...) to make it functional again. Wouldn't this be considered a capital improvement?

Another example, sections of the rimjoist have rotted from vent neglect and will need replaced... Is this a betterment or repair?

Paint is covered as deductible. So new flooring = capital improvement but refinishing existing flooring = maintenance?

Pretty important distinction, improvement vs repair... Hired labor can be deducted for repairs, but not capital improvements, correct? That alone is huge.

... Thanks again to everyone for helping me work through these questions. I'm starting to understand why so many rentals have ancient fixtures with 20 layers of paint! ;)

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Thanks for the info guys, I appreciate it... I guess I'll just play around in TurboTax see if I can't answer all my questions.

So, I see how if primary residence then all improvements, even those after conversion date, go into your cost basis and are non-deductible.

But what if I did it the other way, started as a rental, completely remodeled and deducted all those costs, then converted it to a primary residence? ... I'm guessing it would be the same? No capital gains tax, but I would have to pay back those deductions after the sale?

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I've read through 10 pages of threads on conversions trying to answer my questions and haven't found the answer I'm looking for.

Here's the background.

Primary residence (from 2011) purchase price: $10k
County assessment (structure only): $70k
Only about $2k in costs so far.

I've been in the house for over 2 years, so I'm sitting on my $125k capital gains exclusion (house would likely sell for $50k as is)... But I'm curious what a conversion to rental property would look like and be calculated.

Basically I'd like to remodel the whole house and add 1 bed and 1 bath. Which would probably be something like this.

$40k remodel costs
estimated county assessment (structure): $100k
estimated sale price $110k

I have a feeling this is a stupid question, but I just can't find anyone in a similar situation.

Q: I can't deduct improvements, even after the conversion date, like I would a regular rental?

Basically, I want my cake and to eat it too... I want to deduct all my rental improvement costs AND not pay any capital gains for the sale up to $125-250k (say after I rent for a year or three)... But something tells me the tax man is smarter than that.

What would you do?... Please show math! :D

thank you!

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Thanks Ophelia for the great advice, will definitely follow much of it.

Replaced all the subflooring that needed it, material cost: $330... Nice and level, should take any flooring now.

Am still torn between quick rental only and better rehab to rent and leave on market. Partner and I will continue to plug away and make the final decision once all the floors and walls (addon) have been corrected.

Quick rental will involve painting the wood paneling, cabinets.
If we're going to list it new drywall throughout, perhaps new kitchen, and so on.

Believe the bathrooms are acceptable for now, even to put a for sale sign on.

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Thanks, Aaron for you input! House is closed. LOL, mast in the back is no longer connected, there is modern electrical on the east side of the house... 2 poles in the back will be coming out... Along with all the ancient TV tackle. Only other electrical problem is a bad switch in the small bathroom.

We are hanging all the drywall ourselves. My partner and I both have hanging experience. I've priced drywall under $700 before discounts, should be less if we leave the ceiling.. The ceiling... is strange... the drywall is in acceptable shape, but they used these little stars as screws and there are the standard trailer strips rather than proper joints... I am wondering if I can flush the screws, tape the joints and finish with a deeper texture, thus salvaging ceiling wallboard.

If the budget proves unrealistic, I'll just paint the cabinets and save new ones until next renters... Would be hard to sell with current kitchen, but not rent.

I've got a mud/paint guy at about $70 a room.

... I am not in a high cost, top dollar market. But it is growing and has a fairly hot rental market. Nothing here has to be, nor should be, perfect or top quality. At least not before first round of renters.

Looking to stretch dollars for maximum prettiness, rent and take on smaller rehabs between renters... If it comes out great, I think we'll put it on the market at a price no one should pay ;)

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PLAN WIKI! 05/02/2011 at 04:03PM
*new plywood across the floors
*new drywall all around
*inexpensive cabinets in kitchen
*correct "goofiness" of the addon, and come up with some plan for that wasted space.
*clean up screened back porch & "shop" exterior... Shop might need to go.
*new "roof" on front porch... That green plastic stuff, is kinda tacky and is leaking in 1 spot.
*yard: take out numerous stumps, even ground in a few areas. Mulch and plastic in planting boxes/around trees.
*depending on where budget comes in: craigslist vs new appliances.

Not sure on:
*flooring material: I am thinking linoleum roll is too rental oriented. But I don't want to spend more than $1.5/ SqF.
*bathrooms: they are acceptable for renting, but not ideal for selling
*goofy "trailer" give away doors on back of house.. Still likely too much cash for siding at this point.
*how much intake the HVAC needs... That entire space the furnace used to occupy seems a big waste of space.

Originally posted by motiv8td:

Well, cool you've got 3d pics but fail on your part lol....

I'll try to fix them for ya

lol :oops: thanks!

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Hello all! First time poster, long time lurker...

I have rentals, but this is the first property I am considering flipping. I would take a high price, but mostly want to hold for at least 1-3 yearly leases. Renting and income is more important to me than some capital right now.

My strategy is to pretty up for cheap, and if it is pretty enough, put top dollar price tag on it while it rents... I am looking to spend between 4k and 9k. Probably not more immediately, unless it seems wise...

After a week of clearing trash, brush and crimes against humanity we are nearing an empty canvas... Here are the pics! I will get a wiki going under this and detail my plan.

Advice on cost saving, [cheap] big impact rehab, great tips and anything else very, very appreciated! :D

Start here with quick 3D overviews:
http://dl.dropbox.com/u/91156/REHAB-02/REHAB02_looking_NW.jpg

http://dl.dropbox.com/u/91156/REHAB-02/REHAB02_looking_NE.jpg

... then a photo contact sheet: