Converting primary house for rental

[23994]

Hi,

We are going to move to a new house next year and are considering to convert our current house for rent -- investment property, I am new to it and need advices on the following:

1. if we convert it into rental property, we would need to Report it as rental income, but how could I know what the starting price is for the rental property? should I find a appraisal for it?

2. I am reading Don's book of" 81 Financial and Tax Tips..." he mentioned to keep it as long as possible as Primary property to benefit the tax, but he did not say any details, any tips for me?

Any tips and detailed advices are appreciated!

Thanks,

Sue

 

[SVS]

Hey Sue
I can take a look into the rental rates in your area if you would like.

 

[Thomas Beyer]

1. if we convert it into rental property, we would need to Report it as rental income, but how could I know what the starting price is for the rental property? should I find a appraisal for it?

You do not need an appraisal but it is useful. A tax assessment (usually lower) or a realtor opinion might suffice too. The point is that you need to declare any gain from rental porperties on sale. So estimate high, and as such an apprisal for $600 is money well spent, when in a decade or 2 you sell it to show the gain from that point.

 

[Sherilynn]

Agreed.

Also, if you plan to pull equity out of your residence, it is often best to do that before you move. If you refinance while it is your personal residence, then you are free to do whatever you want with the money (new personal property, personal spending, invest); and when the property becomes a rental then the new, 80% LTV mortgage is fully tax-deductible. However, if you refinance after the property is a rental, then only the portion of equity pulled out that is used for investment purposes would be tax-deductible.

Note: if your current personal mortgage has a large prepayment penalty, then you may want to get a HELOC instead (also while it is your residence).

Further note: I am not an accountant, so please seek professional advice to see what works best for your unique situation.

 

[23994]

thanks all for your valuable tips!