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Author: zhunzi One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121217  
Subject: Rent or Sale? Date: 8/25/2001 9:10 PM
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I'm about to buy a new house. The market is not looking good for me to sell my house, much less break even on it. I can easily get my mortgage out of the house by renting, but I'm not sure how much to mark it up by in order to be safe. What kind of process is involved with renting a house and is it really better to do that vs. selling with a loss?

Thanks,

Daniel
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Author: pbpapa One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 53570 of 121217
Subject: Re: Rent or Sale? Date: 8/25/2001 10:31 PM
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Your question really has little to do with taxes. There are two questions you need to ask yourself (for starters): What are the prospects for future appreciation in the value of my home? If the answer is, 'good', then ask yourself, 'how would I do as a landlord?'
If the answer is 'I would do well or at least ok', well, then, go see a professional, or find yourself a 'how-to' book regarding residential rentals. Actually, if the answer to question #1 is 'good', I would lean towards the rental option (but then I have been a landlord for many years). Let me emphasize, Your decision should NOT be based upon tax considerations.

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Author: pmarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 53572 of 121217
Subject: Re: Rent or Sale? Date: 8/26/2001 3:43 AM
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The market is not looking good for me to sell my house, much less break even on it. I can easily get my mortgage out of the house by renting, but I'm not sure how much to mark it up by in order to be safe. What kind of process is involved with renting a house and is it really better to do that vs. selling with a loss?

While there are definitely tax issues which contribute to your decision, to me this is more a financial and lifestyle question than a tax question. You can read about the tax aspects in IRS Publication 527. I'll offer some observations from my similar experience.

You need to decide if you want to be a landlord. For those of us who desire hassle-free living, there are a lot of drawbacks to being a landlord. You can pay someone to manage the property for you, but that reduces your income from the property. If you want to manage the property yourself, I've seen a lot of good advice over the years from Robert Bruss. (If your paper doesn't carry his column, do a google search and you can find him online.)

As for the financial side, you need to decide whether you can realistically expect the market to improve so you can sell the property. Remember that it can go down further instead of going up. Finally, don't worry about how much rent to charge. The market will decide that, just like it's deciding the sales value of your home.

Phil Marti

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Author: RIBBIT1 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 53605 of 121217
Subject: Re: Rent or Sale? Date: 8/27/2001 4:10 PM
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Dear Daniel

One more aspect to consider when you want to rent our your house, is the capital gain exclusion you get when you sell your main home. Basically, as long as you owned and lived in your home for at least 2 consecutive prior to sale, you can exclude up to 500,000 in capital gains, depending on your marital status. However, if you start renting it out, there is the potential of losing that exclusion, depending on how long your rent it out. Worse case is that you rent and don't live in the house for five year, in which case all gain is capital gain (or more technically, 1231 capital gain). Others have already addressed the other issues (landlord responsibility, etc) so I won't go over that again. Good luck

Ribbit1

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