Berkeley CSUA MOTD:2008:April:23 Wednesday <Tuesday, Thursday>
Berkeley CSUA MOTD
2008/4/23-5/2 [Reference/RealEstate] UID:49816 Activity:nil
4/22    My company is relocating me for a while (2 years probably) and I'm
        thinking of renting out my condo since it's really not a seller's
        market. I'm hoping to break even or lose just a few hundred dollars
        a month by renting it out. How does one calculate depreciation on
        a rental property? I've heard about the Form 46XX amortized
        depreciation form, and without having to do really weird calculations
        that only accountants understand, how much deduction can I expect
        to get from a $500,000 condo that was built in 2003?
        \_ $(Value of improvements)/27.5 per year for 27.5 years. With a house
           you have to deduct the value of the land as it is not an
           improvement (obviously). I am not sure how it works for a condo
           since there is no real land value. Maybe you can depreciate on the
           full $500,000. Remember you have to report the rent as income, but
           you can report the mortgage as an expense. When you sell the
           property you may owe more tax as you have to deduct the depreciation
           from the cost basis. I would get an accountant, because it will
           be worth your while at that point as far as finding out which
           maintenance expenses you can deduct or not and which are
           deductible in the year paid versus depreciated over their
           useful lives. Built in 2003 is not relevant. It could have been
           built in 1803 and you can still depreciate over 27.5 years if
           you just bought it. (It's 39 years for commercial property.)
           \_ most useful, THANKS. BTW is HOA considered expense? How
              about property tax?
              \_ Yes and yes.
              \_ 1. Property Tax is operating expense
                 2. Utilites are operating expense if you pay them.
                 3. any trips you take there to check out the property is
                 4. Mgmt fees if you have a property manager
                 5. Mortgage expense is only the interest portion.
                 6. Closing Costs for buying the property is an operating
                 7. Max is 25k per year you can write off and the rest
                    \_ I've never heard about this. Is this amount
                        a) rent MINUS sum of expense?
                        b) sum of expense?
                        If it's a) then great, but if b) then a lot
                        of landlords are screwed since operating costs
                        almost always exceed that amount (just put in
                        interest mortgage and tax for a cheap $500,000 home)
                 PS I just found out I will have a bunch of deductions and
                    end up GAINING more than I loss ($3000/year) AND I may
                    gain even more if I sell my property. It's really great
                    to be a landlord. I love cheap condos.
                    \_ #7 was confusing. He means you can write off 25k of
                       losses vs. your regular income. But this actually
                       has a phaseout at higher income levels. Making $3k/yr
                       isn't really that great, since you will have to pay
                       taxes on it, at your marginal rate.
                 \_ Don't forget rental property insurance premium and
                    maintenance/repair cost.  -- !PP
        \_ Don't enter the rental business if your condo is in SF.  See the
           "Landlord" thread above.
2008/4/23 [Uncategorized] UID:49817 Activity:nil
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Berkeley CSUA MOTD:2008:April:23 Wednesday <Tuesday, Thursday>