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The last Real Estate Intervention show where the couple in Baltimore is asked how much their mortgage is. They tell the host it's $1600 or $1700 (I think).
Than they tell the host they can probably rent it out for $1300 (they really end up renting it out for $1250). So to the common person looking at the show, it appears on paper that the couple would be losing $300 a month just to rent out the house. Of course, this makes it sound like a sad story. To add to the couples misery, the host Mike Aubrey says that they will encounter real estate management fees for a property rental to try to "add costs" to what appears on paper as a big rental loss.
Why doesn't the show make a distinction what exactly the mortgage entails? Does the $1600/1700 include principal payments? Does it include insurance/property taxes/escrows/hoa etc? Usually when someone says their mortgage is "X" amount, they usually include principal/taxes/insurance and escrow. Most of the time HOA fees are left out.
If it includes principal payments, than obviously you can't deduct that from rental costs. So assuming they are making principal payments (maybe it costs for at least $250-300 of the entire mortgage payment.
If that's the case, I really don't think renting out the home for $1250-1300 with the overall mortgage of $1600/1700 really counts as renting for loss.
Plus you can write off HOA costs, depreciation etc. The homeowners can even fly back from Orlando (where they are relocating) to visit friends/family in Maryland and write off the entire expense as long as they "check up on their property in Baltimore." The trips would count as a rental expense if they do anything remotely relating to their home and checking up on the property does count as a legit expense, especially since they will live out of state now.
What you you guys think? I just don't like it when so many details are left out.
The last Real Estate Intervention show where the couple in Baltimore is asked how much their mortgage is. They tell the host it's $1600 or $1700 (I think).
Than they tell the host they can probably rent it out for $1300 (they really end up renting it out for $1250). So to the common person looking at the show, it appears on paper that the couple would be losing $300 a month just to rent out the house. Of course, this makes it sound like a sad story. To add to the couples misery, the host Mike Aubrey says that they will encounter real estate management fees for a property rental to try to "add costs" to what appears on paper as a big rental loss.
Why doesn't the show make a distinction what exactly the mortgage entails? Does the $1600/1700 include principal payments? Does it include insurance/property taxes/escrows/hoa etc? Usually when someone says their mortgage is "X" amount, they usually include principal/taxes/insurance and escrow. Most of the time HOA fees are left out.
If it includes principal payments, than obviously you can't deduct that from rental costs. So assuming they are making principal payments (maybe it costs for at least $250-300 of the entire mortgage payment.
If that's the case, I really don't think renting out the home for $1250-1300 with the overall mortgage of $1600/1700 really counts as renting for loss.
Plus you can write off HOA costs, depreciation etc. The homeowners can even fly back from Orlando (where they are relocating) to visit friends/family in Maryland and write off the entire expense as long as they "check up on their property in Baltimore." The trips would count as a rental expense if they do anything remotely relating to their home and checking up on the property does count as a legit expense, especially since they will live out of state now.
What you you guys think? I just don't like it when so many details are left out.
I agree with you completely. It's even worse when you are making the decision to go for a quick sale or wait for your price. You get the principal back when you sell the house(minus or plus depreciation). It the same when someone is trying to get you to sell your house, saying well you can sell it for $x but or wait 5 months and sell it for $x+10,000. They'll say your mortgage payment is $2000 a month plus other expenses your better off selling it now. But we know thats not the whole story. It's even more irritating when they try and include things like electricity and gas in the equation as if you will not have to have heat and electricity wherever you live next.
On the other hand for a family that is just living in a house with 2 people and 2 jobs they are still having to come up with an extra 400 dollars each month to live, even they may get some, all or maybe even more than that back at a later time. They might not have that money, or maybe they will have to borrow it at a high interest rate, and regardless that extra commitment could be damaging.
And then you go and leave out a very important detail-----real estate taxes !
In most areas, when you move out of a house and rent it out ,you lose the homestead exemption and thus pay much higher taxes as a landlord vs taxes as a homeowner living there.
In most areas, when you move out of a house and rent it out ,you lose the homestead exemption and thus pay much higher taxes as a landlord vs taxes as a homeowner living there.
Most areas? I've never even heard this before. No town I've lived in has differentiated between homeowner occupied properties and rentals when figuring tax bills. I know I paid the same when I had to rent my condo out.
It's that way in Florida- hurts extra if you bought low in an area that's held value well through the bust. Plus, it's harder and more expensive to get an insurance policy for a rental than for owner-occupied.
And then you go and leave out a very important detail-----real estate taxes !
In most areas, when you move out of a house and rent it out ,you lose the homestead exemption and thus pay much higher taxes as a landlord vs taxes as a homeowner living there.
I did mention real estate taxes in my post.
Anyways with the homestead exemption being loss wty the change from prncipal to rental. At least on a 600k home in Maryland my real esate taxes went up by about $700 when I lost my homestead by converting it to a rental. Plus you can write off the HOA with a rental while you cannot write off HOA with a principal residence.
That's $700 per year so divided by 12 months I was looking at an extra $60 a month in expenses. But you can write that off against the rental expenses. So overall losing a homestead exemption doesn't mean that much.
In Florida if I were to lose my homestead exemption on a $600k home would cost me around $800-1000 depending on the county.
There's a reason that couple on Maryland decided to rent their place out. It's because it made much more sense. They were probably almost breaking even when they factored in the expenses vs rental income.
That's what I meant when the show leaves details out.
Now if ther mortagage including interest taxes insurance but excluding principal were $3000 and the most yet could get was $1500 for rent than it would make sense to sell.
I guess the million dolllar question in a lot of these shows is that a lot of homeowners have interest only mortgages so the $1600 Maybe ther total costs. But again, that's why it better to have all the details.
The reason they don't have you all the details is that it would make for boring television. Those shows are to entertain. Could you imagine how many viewers would tune out an agent going over the nitty gritty details? You can't make ad money if your viewers turn the show off.
I think it's an important detail to add if the monthly payment includes taxes, insurance, and HOA fees. It's only one additional line to add in the show.
They could just say PITI = $1600. Or Principal + interest payment = $1600. It would be better to clarify it.
Anyways with the homestead exemption being loss wty the change from prncipal to rental. At least on a 600k home in Maryland my real esate taxes went up by about $700 when I lost my homestead by converting it to a rental. Plus you can write off the HOA with a rental while you cannot write off HOA with a principal residence.
That's $700 per year so divided by 12 months I was looking at an extra $60 a month in expenses. But you can write that off against the rental expenses. So overall losing a homestead exemption doesn't mean that much.
In Florida if I were to lose my homestead exemption on a $600k home would cost me around $800-1000 depending on the county.
There's a reason that couple on Maryland decided to rent their place out. It's because it made much more sense. They were probably almost breaking even when they factored in the expenses vs rental income.
That's what I meant when the show leaves details out.
Now if ther mortagage including interest taxes insurance but excluding principal were $3000 and the most yet could get was $1500 for rent than it would make sense to sell.
I guess the million dolllar question in a lot of these shows is that a lot of homeowners have interest only mortgages so the $1600 Maybe ther total costs. But again, that's why it better to have all the details.
You tring to say buying a house with a mortgage payment of $1600-$1700 and then renting it out for $1250 a month is profitable?
Surprised more people aren't doing that( sarc)
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