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I believe there are tax advantages to waiting until after 62 before selling a home. How about rental units? Do they enjoy similar tax advantages?
Been renting homes in S. Florida for seven years and I've had enough. It is time to throw in the towel in the next few years. Why?
*Hurricanes/extremely high insurance on older homes
*Theft/Vandalism/Shooters(yes....really....drive by shooters drove out a tenant)
*Termites
*Cockroaches
*Rats - get in attics and reproduce
*Hot water heaters have short lives
*Air conditioner problems/replacement due to heavy usage
*Hyper governance - especially down there
*Roof leaks
*Brush removal needs-the jungle wants to reclaim yards
*Deadbeats
*Shoddy work
*Excessive property taxes
*Manager got a job and doesn't have time to spend on rentals anymore
*Drain field replacements
At 59 years of age, I am starting to consider retirement. I live in the Colorado boondocks with almost no local employment opportunities. Had been planning on retiring on rental income. Rental income is negative far too often. I'm unsure if I have lost money over the past seven years but I do know the income is unreliable and very often negative. Maintaining old homes can be extremely expensive. Even if problems were cut in half this scenario is still unattractive.
Have you considered a 1031 exchange to move your rentals closer to your Colorado 'boondocks'?. Both Florida and Colorado have great rental markets and attract visitors to those areas. This would mitigate the downside to selling rentals after 7-years (without 2/5 occupancy).
You could essentially do the same thing by selling your rentals in Florida and buying new ones in Colorado, but, your capital gains taxes would likely be higher, as would your in/out real estate fees.
OTOH, I've tried remote rentals (less than 100 miles) and found it too much of a pain to manage myself ... and too expensive to have someone else manage it/them. Real estate/rentals is still a better investment than many others, but, you need to be close enough to keep an eye on things.
if you have intentions of selling and will have large gains do it at least 3 years from medicare . medicare goes back 2 years to set premiums . large gains can get a couple a 600 a month increase over and above the normal rates.
A very respected old friend, Gary, who is also a corporate CPA has several duplex rentals down there. He has rented homes his entire career. That is where I learned of very low home prices in 2011.....and very low they were. I thought it might be neat to retire down there and be the best senior card players around. Gary has a photographic memory which is quite handy when playing cards.
The Ft. Myers and Las Vegas areas were hit the hardest during the 2008-2012 period after rising the fastest in the 2006 period. The homes have absolutely gone up in value....more than doubling. Though doubling $50,000 pales compared to doubling $500,000.
I also own a very small aquarium maintenance business.....two accounts to be exact. But taxes are very similar to a much larger business. To make a long story short, I muscle through my own Turbo taxes since an accountant would charge at least half of what I net. I don't always net anything. My accounting teacher advised me to be a CPA, I am not totally lost....just overwhelmed a bit.
Right now I don't want to be a landlord anywhere. I don't really want to be in Colorado either. I built my own place and received a property tax bill five times higher than expected. It is rigorous to pay $9000 in property taxes when one makes ~$10,000-$20,000/year. I still own my Denver bungalow which kicks in a $1500 tax bill plus maintenance and utilities.
The costs of living, especially medical and food, is cheaper in Mexico for example. There are challenges to owning and building in Mexico but that is a different subject.
I just want to build another place with low property taxes and live out my days in a very simple manner. Based on genetics, I may have about 20-30 years left....God willing.
Then sell. I know how you feel. I got out of the rental business when it became more hassle than I thought it was worth. I don't regret my decision in the least. There are better things to do in life.
As to your question, I don't know of any potential tax advantages that you'd get by waiting until you're 62--unless your other income would be dramatically different. Am I missing something? Depending on the number of houses and your potential gain, it might be advantageous to spread out the sales so as to maximize your capital gains exclusion. But even if you could save a little, it still might not be worth it if you want out. Get out while the gettin's good.
Last edited by jackmichigan; 03-01-2018 at 06:35 AM..
Seems like rentals is a business that millions have tried....and hated. I'be been mystified for seven years now. I hardly ever had problems when I rented. Replaced one thermostat with my own labor...sent the bill for $30 to my landlord. She complained...
If I could rent a home for a year and incur one $30 bill, I would faint. If I can get through a month without coughing up $300, that is a great month. A lot of bills are over $1000. Some are well over $5000.
I couldn't imagine renting out dozens of homes. Though I guess that would tend to even things out....in theory.
Some things are just hard to do for me. Moving and selling a home come to mind.
Quote:
Originally Posted by jackmichigan
Then sell. I know how you feel. I got out of the rental business when it became more hassle than I thought it was worth. I don't regret my decision in the least. There are better things to do in life.
As to your question, I don't know of any potential tax advantages that you'd get by waiting until you're 62--unless your other income would be dramatically different. Am I missing something? Depending on the number of houses and your potential gain, it might be advantageous to spread out the sales so as to maximize your capital gains exclusion. But even if you could save a little, it still might not be worth it if you want out. Get out while the gettin's good.
Seems like rentals is a business that millions have tried....and hated. I'be been mystified for seven years now. I hardly ever had problems when I rented. Replaced one thermostat with my own labor...sent the bill for $30 to my landlord. She complained...
If I could rent a home for a year and incur one $30 bill, I would faint. If I can get through a month without coughing up $300, that is a great month. A lot of bills are over $1000. Some are well over $5000.
I couldn't imagine renting out dozens of homes. Though I guess that would tend to even things out....in theory.
Some things are just hard to do for me. Moving and selling a home come to mind.
Some just aren't cut out for it (including myself) - I know I over-maintained and over-improved my rentals & the big advantage to that was being able to sell for top dollar & quickly when I decided enough was enough. That said, my rentals were local and self-managed. If I hadn't self-managed there wouldn't have been any real profit at all, as it was, some of my "profit" was unpaid labor. I'm glad I did it, and I'm glad it's over. And I didn't give a rats ass about the tax bite when selling.. Like divorce, it's expensive, but worth it.
Location: Formerly Pleasanton Ca, now in Marietta Ga
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Man get out asap. It sounds like you were doomed from the start because you bought in areas that aren't so nice. Those areas tend to have the highest rents to price ratio, but can be difficult to manage. Best left to those who are experienced or have the stomach. They take more time than the better areas do.
My rentals are is a blue collar area, not the best, not the worse.
I live 800 miles from my rentals so I have a manager. I have monthly costs, but I factored those in when I bought.
I've been lucky in that the income allowed me to retire early.
But in your case, start selling now. You never know if the market will drop. Better to pay taxes on a profit then to make zero and brag you paid no taxes.
I am retired and am still landlording but don’t hate it. However, you do so STOP. Get out now before your medicare premiums are impacted by your income. They look back 2 years.
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