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If I have a house mortgaged in my name but have a tennent/ buyer who would like to work out a rent to own contract on the property. Obviously I would hire a lawyer to handle that but what I was wondering is once that contract is valid would that property still be factored into my debt to income ratio if I wanted to finance another property in the future.
Thank you for the reply...is there anyway besides selling the property (which is impractical ATM) to get around this? What I WANT to do is refinance my other house (the one I live in) at a lower rate BUT I don't think I will be able to if the debt from the first house is factored in.
I will make sure that income is stated as such on my return.
Hire an accountant. IF you decide to include the income, then you get to deduct expenses for the house as well - AND, you really should take the appropriate depreciation on the property. If you do not, and you later do not sell the house and stop renting it, the IRS will assume you DID take the depreciation and will make you pay it back - even if you did not take that deduction.
^ ny annie has some good advice, mine is supplemental.
you could have your tenant sign a 1 year (maybe even longer) lease and use up to 85% of the rent as income (depending on the regulations where you live and at the financial institution).
when you sell, be prepared for capital gains. if you cannot show that the home was your place of residence for at least 3 of the last 5 years (again, this varies), you will have to pay gains on the appreciation of the property. don't just consult an accountant, find someone that specializes in rental property or real estate in general
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