All Forum Posts by: Zoey W.

Thanks again for your reply but my question is related to basic manner in which landlords are taxed. I am asking this question on bigger pockets because BP is more familiar with real estate. My question was...

If landlord has mortgage on rental property, is the monthly mortgage payment tax deductible or only the interest on rental property or neither? What I mean is... I certainly hope landlords are NOT taxed on gross rent revenue but on rather net rent profit?? 

Thanks but I did not understand your reply nor do I know what a "LL" is. I also do not have any W2 income thank goodness. I have an s corp for my homebased business.

1. Forgive my ignorance but after watching youtube videos regarding recent changes about landlords it gave me the impression that "section 24" means that landlords are now taxed on "gross revenue" and not "net profit"? I certainly hope this is NOT the case?

2. If landlord has mortgage on rental property, is the monthly mortgage payment tax deductible or only the interest on rental property or neither? I am confused about this even after researching because things are always changing to make things worse and worse for landlords (horrible). I don't even know what is current anymore.

Thanks 

My mother actually had numerous rental properties (over 7 of them) and I MOST tenants were an absolute NIGHTMARE. I cannot tell you how many times tenants TRASHED entire house, put dog feces on ceiling, destroyed windows/doors on purpose... it was horrifying. I recall my mother in tears sobbing as she stood in front of the TRASHED house with tenant... tenants refused to pay rent and trashed entire house and it was a very nice house in VERY nice upper scale neighborhood. 

It appears my mother must have been screening tenants incorrectly? Because the ratio of NIGHMATRE tenants she had in comparison to the number of properties she has seems waaaaaay too HIGH.

Witnessing all this has honestly left me feeling EXTREMELY concerned. My only hope is that my mother was NOT screening tenants properly? She also was NOT using property management service... she was screening, placing and managing the properties herself.

I 100% FULLY understand that bad tenants are going to happen to anyone eventually, it's just the nature of the beast... but the overwhelming number of NIGHTMARES my mother dealt with just doesn't seem normal! :(

This is what is making me feel nervous to NOT use property management company (a good one of course)... to hopefully increase my chances of not ending up like my mother.

... and because of her experiences she is highly against me wanting to invest in real estate. I do not agree with her... I just hope I am not being naive. A friend of mine who had dozens of properties... many section 8s etc (netting over 50K/month profit)... also got out of rentals due to it being massive headache. Switched to being PML (private mortgage lender) but now he is strictly hard money lender instead.

Let's say I only wanted to use property management company for one year... is there usually a contract with property manager that you MUST continue to use them for X amount of time or for specific property? Thanks!

If I am going to have out of state rental (for just one property) and I have very reliable handyman and plumber (who I am friends with and trust)... and I were to use Bigger Pockets "tenant placement" service for example to screen potential tenants etc... then so sorry but I am confused what the "numerous legal complexities that landlord could potentially stumble upon" are?

I also also confused about keeping house in my name or switching it to LLC because I keep hearing conflicting opinions on this and that LLCs don't really protect all that much at all... so what is the point.

This will be my very first rental property. I would 100% NOT be confident or comfortable in finding/screening/placing my first tenant especially since I will not longer be living in the same state as the property after reno is finished. But if I can use a service to find/screen/place my tenant then I am confused whether it would still be worthwhile for me to use property management company as I already have in place people who I trust who can resolve things if there is ever an issue with the house tenant is in... and the fee for property management company takes up a huge amount of cash flow.... so I rather handle without if possible... if I had multiple properties I can understand property management company but for this one house I am having difficulties seeing it... 

Thanks in advance for any possible feedback...

Thanks for your reply! The 300k was gifted to me by my mother. She gifted it to me so that I could pay off the mortgage on my primary residence I currently live in. I bought the house for 590k last year. I put 240k as down payment. This 240k is also NOT taxable as I was living in another state and had to sell that house (primary res) in order to buy my current house as my primary residence. 

So all the money used to buy my current house is not taxable. So it doesn't make sense that now I would be taxed on this money if sell this house IF I turn it into a rental for a couple of years BEFORE I sell it? I understand being taxed on any GAINS.... but I do not understand being taxed on funds that were gifted to me or funds from the sale of my prior primary residence. I lived in my primary residence for over 4 years and then sold it... those funds are not taxable. 

I still have about 50k mortgage left I need to pay off.

Thanks so much for your reply.

1.You mentioned "The donation money used to buy the real estate doesn't change anything". Does this mean I would suddenly be taxed on this donated money when I sell my house IF I turned it into an asset (a rental prop)? So the reason I would suddenly be taxed on donated money from my mother that should NOT be taxable is because I turned that tax free donation money into an asset by turning my primary house into a rental?

2. So sorry my chicken brain didn't fully understand what you meant by "There is no tax implication if the asset is within 5 years (121 rule). You will only have depreciation recapture."

In above sentence you wrote "if the asset is within 5 years". Are you referring to (if asset is sold within 5 years) only then would I not be taxed on this donated money used to acquire this house?

Thanks in advance!!

Let's say someone bought a primary residence for 300k but 100% of the down payment was using money that was donated to the person by their parents and that this donated money was large enough to make an all cash offer on the house (so no mortgage on house).

Let's say this person lived in the house for 2 years as their primary residence but then decided to turn it into a rental property for the next few years. After which time this person no longer wanted to hold onto the property and sells it. I understand there is NO tax on primary residence when sold other than gains in excess of 250k (for singe person). I understand people are taxed only on investment properties.

My question is.... I HOPE only GAINS are taxed if this person were to sell this house (that was turned from a primary residence into a rental prop) as described in above scenario? Because the 300k that was used to buy the house is 100% NOT taxable as it was a family donation (from a parent to child). So it appears that only the gains would be taxed if house is worth more than what it was bought for when it is sold?

Apologies for this  newbie question. If anyone can possibly clarify the above it's MUCH appreciated!!