In our last blog entry, we discussed the finer points of investment rules that apply to real estate investments. When you’re saddled with an unwanted property, it can seem like the best decision to try and turn a profit by renting it out. However, renting out an unwanted property can quickly become treacherous for the homeowner. There are loads of hidden costs in the renting process that rack up quickly, much like the selling process, so it’s important to enter the markets with your eyes wide open.
The Taxes Behind Selling Your House
It always seems like the IRS is setting up some sort of elaborate trap, doesn’t it? For example, how tax forms seem to be set up with the express purpose of making you look dumb. Renting a property is no different, unfortunately, and the entire process can be potentially hazardous to navigate. However, one of the perks no one mentions about our tax system is that you might not have to pay capital gains tax on the sale of your property. While this won’t count for those folks trying to sell an unwanted property that they inherited, it will work for anyone pondering selling their primary residence.
If you were to attempt renting and then decide to sell the property, you’d most likely be hitting the market on the downswing that economist and experts alike are claiming is coming around the corner, but you’d also have to pay a capital gains tax on the sale. Depending on your bracket, a capital gains tax can be around 20 percent for those folks that don’t have the home listed as a primary residence. To qualify for the exclusion of this rule, you only have to have the property listed as your place of residence for only two of the last five years. The disappointing part for most property owners that attempt to rent and later find out they’d rather sell is the 20 percent capital gains tax. If you sell your unwanted house for a profit of $300K, you’ll be paying $60K in taxes that year, which is a staggering number for most homeowners who are looking to make a profit.
What The Future Holds For House Buyers
Colorado All Cash has discussed the current housing bubble at length in some of our previous articles. Our attention is focused on it heavily because we still remember how devastating the last one was. As far as Northern Colorado goes, especially Fort Collins, there has been a population boom largely due to the legalization of marijuana, which has driven the prices of houses and rents way up. This exponential growth is not sustainable and the folks that have recently bought a house for a very high price are about to be in deep water, as economists predict a mid-2019 crash in the housing market. So, when determining whether or not you’d like to rent your unwanted property to folks around town, think about how rents will likely suffer just as much as home sales will. When the market turns sour, the fair-weather Coloradans that have moved here for the legal marijuana are likely to retreat to their home states and not look back, leaving a surplus of real estate developments and apartments.
The Tenants Cause Quicksales
With all this in mind, you should probably consider whether or not you really feel like handling droves of people demanding attention from you as their landlord. That’s not to say there will be only terrible tenants, since there will probably be plenty of wonderful tenants as well. However, before you set out to become a landlord, you should try to be honest with yourself and think about whether or not you have the time and patience needed for this kind of work. Most people are needy, and your tenants might require constant maintenance on the place that can rack up the costs of maintaining it to their standards. Others can cause damage on the inside of the house and you’ll hear horror stories about hoarders and the like all around town.
Real Estate Quicksales
Curious about the finer points of tenant management? You’re in luck, as Colorado All Cash is dedicated to educating you about the pros and cons of renting an unwanted property in the market you’re dealing with today. In our next blog, we’ll talk about the various ways that your tenants might cause potential disruptions, and potentially how to deal with those. If you’re not interested in dragging out the eventual sale process, turn to our quicksale option. Instead of risking your investment, get the cash you need for your house now. Avoid hidden fees and tap into a market that doesn’t depend on the whims of fickle buyers. Our cash for homes program is fair and reasonable, and all about getting you out of the responsibility of dealing with an unwanted property. Our services extend throughout the entirety of Northern Colorado, including Greeley, Fort Collins, Loveland, and much more. Contact us to relieve your burden today.