Posted on: 23rd Dec, 2011 01:08 am
I have 3 rental properties which are upside down (loan to value) approx $280K. I'm paying out of pocket approx $800 per month to make-up for the difference in rental income to expenses. If I short-sell the rentals, my CPA of 2 years (used TurboTax prior) said I will have to pay the IRA approx $100K. Bankruptcy isn't an option because my wife & I earn approx $200K a year, don't have any debts other than the mortgages and have nearly $200K in the bank, and it doesn't erase our tax liability. What options exist to help us get rid of these bad performing assests? Or, are saddled with them unless we pay the IRS the $100k? By the way, we are opened to the idea of making one of these rentals our primary property, if there are any potential benefits. Please advise. Thanks.
If you are renting now, then moving into one of the properties may not give you any more tax breaks then your current set up. What you should take into account is the market, like any market, real estate is a cycle. If you get rid of your asset now, then in 4 years want to get back into rental properties, the costs will have increased and you may be paying more for the property than you currently owe today. Not to mention that the interest rates will not be this low for a long time. Look at the history of interest rates, money is cheap today. So you spend $800 a month on the property, its a $800 investment, to have someone else pay off your mortgage for you. $800 expenditure on a real property is not a killer if you are making 200k per year. not to mention, each person who shorts sales theier home, makes a devistating impact on the market. This home would have to sell at auction or a shorted sale, then be resold again to regain some of iits value. Your neighborss would be the ones hurt. Short sales are not a way to take advantage of the stystem. They are meant to help struggleing homeowners save their credit. You signed the promissory note, you can make the payments. Period.