real estate/investment question

[jk the sooner fan]

ok, so i recently inherited a house in purcell......its a rent house, paid for......the question is should i sell it before there's a tax on the sell (i have 6 months before any penalty), or should i keep it for the rent income

right now there's a property management company that takes care of everything and keeps a small share of the rent $$$

my concern is filing taxes in Oklahoma as a non-resident

on the one hand i think selling it would eliminate any hassle for owning another house, but then there is also the thought of having a nice little check coming in every month

thoughts?

[Mjcpr]

What could you sell it for and what would pocket from rent on it each month?

[IB4OU2]

Since you have a middle man taking care of all the day to day concerns and if you're collecting a nice tidy check each month, I would keep it as an investment. Plus you could probably take some of the depreciation and repairs as a deduction on your income tax and if some day you get tired of dealing with it, then sell it.

[jk the sooner fan]

What could you sell it for and what would pocket from rent on it each month?

still waiting on the appraisal from the probate, but i'm guessing between 60 and 70k, and it brings in about 600 a month

the other consideration is that JK3 may very well go to OU after next year, and once he moved out of the dorm, living in that house would be alot cheaper for me (i'd only be out the utilities) than getting him an apartment

although the loss of the monthly rent money and his gas bill to get back and forth from norman to purcell might offset that

[sooner_born_1960]

You will have a hard time beating that return on your money, if you sell.

[Mjcpr]

The management company would help a lot; having a rent house can be a pain in the ***.

[jk the sooner fan]

i agree, with you and 1960 both......it would be one thing if the house were closer to me......not that driving to Purcell is an all day trip or anything.....my gut instinct is to sell it.....but having that monthly income would be nice as well

[SleestakSooner]

as long as you have good renters in the place and there are no foreseen upcoming repairs needing to be done, it would be wise to keep getting your residual rent checks until such time as you either no longer have renters or it becomes a liability.

You can always sell the place at a later date if it becomes a burden. Right now is not the best of times to sell a home either. Waiting seems to be in your best interests at this juncture IMO.

[jk the sooner fan]

good point, thanks!

[Mjcpr]

Oh, well I didn't think of that.

If you can get good renters and have no repairs, go ahead and keep it.

:D

[jk the sooner fan]

the only major repair that i know of is that the house really needs to be totally rewired

we've done minor repairs here and there.......its a 3 bedroom with a den and a living room....currently have renters there that pay their bill on time.....i guess thats a start

i need to spend some time with the property management folks to know exactly what they are doing

[OUDoc]

You've got connections, right? Make sure you do a background check on the renters.

[SleestakSooner]

the only major repair that i know of is that the house really needs to be totally rewired

we've done minor repairs here and there.......its a 3 bedroom with a den and a living room....currently have renters there that pay their bill on time.....i guess thats a start

i need to spend some time with the property management folks to know exactly what they are doing

I know a good electrician here in Norman ;)

[JohnnyMack]

You should give it to 1tc.

[mdklatt]

Now doesn't seem like a very good time to be trying to sell a house.

[Hamhock]

is the area appreciating or depreciating? at what rate? is the $600/month net of mgt fees? i'd figure about $150 for the tax filing.

also, i'm not clear on what you mean by "6 months before a tax on the sale" you get a step-up basis, so the tax on the sale is the difference in what it was worth when she died vs. what you sell it for.

get someone that knows what they're doing to do a NPV on both options. you'll get a black/white answer.

[jk the sooner fan]

is the area appreciating or depreciating? at what rate? is the $600/month net of mgt fees? i'd figure about $150 for the tax filing.

also, i'm not clear on what you mean by "6 months before a tax on the sale" you get a step-up basis, so the tax on the sale is the difference in what it was worth when she died vs. what you sell it for.

get someone that knows what they're doing to do a NPV on both options. you'll get a black/white answer.

its about 600 net, sometimes a little more, but always at least that

i was told that when you inherit property, if you sell it within 6 months, there is no tax penalty on the profit

after that 6 months, there is

[Hamhock]

i was told that when you inherit property, if you sell it within 6 months, there is no tax penalty on the profit

after that 6 months, there is


hmm...never heard that before. i'd do some double checking before i made decisions based on this advice.

"profit" means gain. Gain is calculated by subtracting your "basis" from the sales price. your "basis" is the FMV of the property at death. It's called a "step-up basis".

If you sell the property with the first year, it is short term gain, which is ordinary income. if you wait over a year, it is capital gain.

i really recommend getting some advice from someone a professional you trust.

[jk the sooner fan]

well a tax attorney gave me that info, but your right, i'll double check it first


sleestak - i will keep that electrician info in mind.........i was told that rewiring an old house like that would run around 10K......yikes

[Hamhock]

well a tax attorney gave me that info, but your right, i'll double check it first



i'm not an attorney, but i've never heard of it.

[jk the sooner fan]

here's what i got from a reliable source


If you sell the house within 6 months of your grandmother's death, whatever the selling price is will be considered the "market value" on the day of your grandmother's death. Since you will inherit the property at its market value, if you turn around and sell it at what is considered to be the "market value," there would be no capital gains tax owed.

But let's say you wait a year to sell the property. You inherit it at its market value on the day she died, which we'll assume is $100,000. If you sell the property later for $200,000, you would owe long-term capital gains tax of up to 15 percent plus state tax on $100,000 -- the difference between the market value on the day she died and the market value on the date of sale.

[StoopTroup]

I'd sell it and put away some rent dOUgh for JK3's place in Norman while he's in school.

Invest the rest.

[Vaevictis]

here's what i got from a reliable source

The only way you save taxes on that, if I'm reading it correctly, is if the market value of the house goes up in the first six months of ownership AND you sell it at that price in the first six months.

Unless you have reason to believe you can sell it significantly above the value you inherited it at within the next six months, it doesn't sound like that's a factor worth worrying about.

[jk the sooner fan]

i'm pretty sure i'm going to sell it at this point.....i wonder if after the appraisal comes out and establishes the fair market value......if i sell it for less than that, do i get some sort of tax break for the loss?

[Hamhock]

if it goes up to $200,000 from $100,000...that's $100k more you get for the sales price. the tax rate is not 100%.

under his example, you sell it for $100k and pay no tax, or sell it for $200k and pay some tax.

[jk the sooner fan]

i think you missed my question, i asked if its valued at 100K, but sells for 75K do i get some sort of tax credit for a 25K loss

[mdklatt]

i'm pretty sure i'm going to sell it at this point.....i wonder if after the appraisal comes out and establishes the fair market value......if i sell it for less than that, do i get some sort of tax break for the loss?

Smash out all the windows and do doughnuts in the front yard. That will keep the property value down.

[Vaevictis]

i think you missed my question, i asked if its valued at 100K, but sells for 75K do i get some sort of tax credit for a 25K loss

There are provisions for them, but I'm not 100% sure as to exactly how they work. I think you can use them to offset capital gains (and thus not pay taxes on them), and you can carry it from year to year for a certain amount of time. I think you can also use it as a deduction on your main tax return as well (irrespective of capital gains), but only up to a certain amount.

http://www.irs.gov/taxtopics/tc409.html


If your capital losses exceed your capital gains, the amount of the excess loss that can be claimed is limited to $3,000, or $1,500 if you are married filing separately. If your net capital loss is more than this limit, you can carry the loss forward to later years. Use the Capital Loss Carryover Worksheet in Publication 550, to figure the amount carried forward.

[Hamhock]

i think you missed my question, i asked if its valued at 100K, but sells for 75K do i get some sort of tax credit for a 25K loss


i didn't miss the question. i was just pointing out that if the property appreciates a bunch, the fact that you pay tax on the appreciation doesn't offset the fact that you are depositing more money that if you had sold it before it appreciated.


if the value goes down, you can either revalue the estate (if it happens within 6 months), or you get credit for the capital loss. you can only deduct $3k of loss per year, or offset it against gains. basically what V quoted.