Rental Property - Taxes and more (sales, mortgage, credit)

[notkim]

Ok, so this is my situation. We own a house in NC which we are currently renting via a management co. because we had to move out of state (NJ) for job training. We bought the NC house 5 years back (new construction) thinking that we will be in NC for good. Unexpectedly spouse got the training offer and we could not turn it down.

Our training is coming to an end and we will be moving out of NJ as well, but have not decided where. We might even come back to NC in our house itself. If we move to NC then as is well and good, we do not need to know anything. But there are high chances that we may move to TX or NV.

So my questions are:

1. Is it wise to sell the house vs keep renting it out? We have no significant financial strain even if we do not sell it as long as we rent it out.

2. Taxes - for 2016 we had to pay NC taxes on our Adj Gross Income (which included the rental income as well as our income in NJ). Our NJ income was not very high appx. $50k, hence we paid a nominal amount of tax to NC as non-residents and claimed credit/deducted it on our NJ state tax return. That is what we were told by our accountant (We are having issues with our tax accountant so before anyone tells us to direct our questions to an accountant). However going forward that will not be the case. For eg: say we move to NV, then we pay NC tax on our adj income, however there is no state tax in NV, so we cannot deduct anything. Had it been a nominal amount then I would not have bothered. But spouses income is going to increase significantly from next year.

3. Should we create a LLC. going forward and handle the rental property thru the LLC. in case if we decide to keep it?


I know these questions should be directed to an accountant, realtor etc. but we are in the very early stages and I was hoping to get some understanding before I go and seek professional help. Right now I do not even know what questions to ask And was hoping for some guidance.

[goldenage1]

Originally Posted by notkim

....We bought the NC house 5 years back (new construction) thinking that we will be in NC for good. .................

1. Is it wise to sell the house vs keep renting it out? ...

The factor you have not mentioned is how much the house has appreciated over the 5 years. If you could sell it for a decent profit, wouldn't your life be easier?

[MrRational]

Originally Posted by goldenage1

The factor you have not mentioned is how much the house has appreciated over the 5 years.
If you could sell it for a decent profit, wouldn't your life be easier?

And even if you can't sell at a profit...
Sell it for the best price you can get (even as it is) and move on unencumbered.

When does the current tenant lease end?

[notkim]

Originally Posted by goldenage1

The factor you have not mentioned is how much the house has appreciated over the 5 years. If you could sell it for a decent profit, wouldn't your life be easier?

Originally Posted by MrRational

And even if you can't sell at a profit...
Sell it for the best price you can get (even as it is) and move on unencumbered.

When does the current tenant lease end?

We did not think of selling it, up until now. I do not have the $ figures of the appreciation amount. How do I find that out?

It was a new community and the builder just finished building. They still have a few homes that are not sold yet. TBH I do not expect a big profit at all, we might come out even of what we paid after considering the realtor fees and any other fees associated with a sale.

Our current tenant's lease will be up in 2 months.

[goldenage1]

Originally Posted by notkim

We did not think of selling it, up until now. I do not have the $ figures of the appreciation amount. How do I find that out?

Use a service like Zillow or Realtor to look for recent sales , not asking prices. Look for nearby homes with similar size and age. The builders homes a few years old are probably selling for less than their current asking prices. So, you may be correct that you would just break even.

Our experiences with renting out homes were done out of necessity rather than to build income. It was a nuisance I would not care to repeat. Thus, I recommend selling and getting on with your new life.

[MrRational]

Originally Posted by notkim

We did not think of selling it, up until now.

Five years ago was a tough time to sell... but it could be argued you should have sold then.

I do not have the $ figures of the appreciation amount. How do I find that out?

You can estimate it based on RE adverts. Closed sales of comparable properties to follow up.

Our current tenant's lease will be up in 2 months.

Good timing. Look it over for what the renewal terms (notice) might be.

When were you last in the house?
Beyond the touch-up paint and light bulb level... does it need anything done?

[notkim]

Originally Posted by MrRational

Five years ago was a tough time to sell... but it could be argued you should have sold then.

You can estimate it based on RE adverts. Closed sales of comparable properties to follow up.

Good timing. Look it over for what the renewal terms (notice) might be.

When were you last in the house?
Beyond the touch-up paint and light bulb level... does it need anything done?

We do annual trips to insoect the property. Our management co. does semi-annual inspection and sends us pics. The current tenants are keepibg the property very well. The last time we made a trip, the property looked impeccable. Unfortunately the tenants are moving out of state.

We are looking at 3 prospective job offers - one in NC & the other 2 in TX and NV. We will only find out where we will land in a month or 2 at the most. That is why we are in a dilemma about selling or putting it for rent. If we move to NC then no need to sell it. We can just ask the management co to not rent it out after the tenants move out and to keep an eye on the house till we move in.

[notkim]

Originally Posted by MrRational

Beyond the touch-up paint and light bulb level... does it need anything done?

Nothing needs to be done.

[ucctgg]

Originally Posted by notkim

Ok, so this is my situation. We own a house in NC which we are currently renting via a management co. because we had to move out of state (NJ) for job training. We bought the NC house 5 years back (new construction) thinking that we will be in NC for good. Unexpectedly spouse got the training offer and we could not turn it down.



1. Is it wise to sell the house vs keep renting it out? We have no significant financial strain even if we do not sell it as long as we rent it out.
.

Find an approximate value for the house.
For my example, let's say $300k, with $100k in equity.


Now assume you don't own the house. Would you spend $100k and take on a $200k
mortgage to buy it today ? If then answer is no, then sell it.

[notkim]

Originally Posted by ucctgg

Find an approximate value for the house.
For my example, let's say $300k, with $100k in equity.


Now assume you don't own the house. Would you spend $100k and take on a $200k
mortgage to buy it today ? If then answer is no, then sell it.

I understood the 1st part. About the $100k equity. But list you on the 2nd part where you say ..."assume I don't wn the house. Would I spend $100k & take a $200k mortgage to buy it today. If no, then sell".

Can you please rephrase it or explain it in detail.

Just FYI: The above property in question is a townhouse.