I have been renting out my first home for the past year. The mortgage is underwater and my wife and I decided to hold on to the property until we decided what to do next. After finding out that we could not claim any of the losses because of income limitations, our next step became very clear. We have to get this property off the books. My question is as a seller is it better to pose a short sale request to our lender with a buyer already is in place? Meaning should I begin marketing the property to potential investors first? Thanks BP for your feedback.
Talk to your lender first. They will have you list it on the open market. Don't waste time with a buyer you find on your own. Of course You'll need to qualify for the short sale......an inability to pay.
While you can't take any passive losses now due to income, you will accrue them, carry them forward, and be able to either use them to counter future gains down the road or use them to lower your capital gains when you sell.
You should also meet with your accountant to determine what your income tax consequences will be when you well via a short-sale. Our clients are often surprised at the amount of tax they will have to pay even when they sell via a short-sale or lose the property through a foreclosure. It is important to know what the tax implications are before you make any decisions and move forward.
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