Renting Out My First Personal Home Purchased Two Years Ago

3 Replies

Purchased home back in 2015 brand new. We just rented it out for 18 months and we moved into our other new home that just finished construction. I plan on acquiring new properties in the years to come and my wife is a realtor which helps with finding properties. Does anyone have advice on how to handle the income from the home I purchased back in 2015 now that it is a rental? Also, can I form a real estate investment/management company even though the property still shows registered in our personal names? I want to see if I can turn this into a business and start taking advantage of the tax strategies that are available. 

Thank you all for your help in advance!

@TONY GALENTE you should handle the rent income by establishing a "reserve" account. Save up six months of vacancy as a safety net. Then continue saving up the cash-flow so you have funds available for the next investment.

I personally don't recommend spending a dime of the money earned. Dump it back into new investments and grow your portfolio until you reach the magic number (whatever that is for you) and then pay everything down and retire.

You can certainly establish a company and start managing rentals. I recommend transferring that property (along with any new acquisitions) into an LLC.

I completely agree with the reserve account idea which I have already done. I don't think the lender will let you transfer a property you have a loan on into an LLC or do lenders not care as long as they are getting their money?

@TONY GALENTE

Did your home appreciate in value from the time that it was purchased? If yes - by how much?
You may be better off selling the home to take advantage of excluding up to $250,000/$500,000 of gain.

You do not need to form an entity to take advantage of tax strategies. You will be required to report income and expenses regardless of whether the rental property is in an entity or owned in your personal name.