Possible real estate purchase - eeek!

Orange-catzNovember 13, 2013

Im not sure where to start with my long, complicated saga - am I a homebuyer? Am I an investor? Or both, or neither?

Im a single F, have a 2-flat which is paid off, I live in upstairs apt. and rent the downstairs.

Am wanting to buy a small 2 BR cute cottagey house in a better neighborhood - may be able to purchase in the 130-140 K range. In the meantime, I have not yet completed all the details of renovation of my 2 flat - I've accomplished a heckuva lot but there's enough that's not yet finished in my unit and in the basement/exterior that would mean losing out on 30-40,000 were I to just bail out now and sell as-is.

So ideally, I would stay in my 2nd floor unit and complete the work, rent out the little house for 1-2-3 years until I'm ready to sell my 2 flat and move.

In theory I should be able to rent it for just enough (just barely) to cover the monthly p & I, insurance and tax escrow, and I assume I could also write off the interest and expenses along with the 1st floor apt.

So, obviously I wouldn't get a huge profit from rent on rent the little house - the value to me is in being able to act now, to a good deal on a small house in a neighb I would not otherwise be able to afford (this small 700 sf house is an anomaly), while at the same time not losing out on an (estimated) 30-40,000 in additional profit on my 2-flat (above the estimated 30,000 in appreciation.

So, I'm not your typical real estate investor (in that I would eventually be living there and selling off my two flat) but
I'm not your typical home buyer either, as I am needing to look at it from the investment angle somewhat.

And where does capital gains tax fit into all this??

QUESTION: Is there such a thing as a real estate investment-financial planner person? I basically know what I want to do, thinking that it SHOULD work, but.... could really use a reality check about whether it's a wise move or not.

Thanks in advance for yr input

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Since you don't plan to live there for at least a year, the cute, little house would likely be considered an investment property. As such the interest rates on any mortgage will be slightly higher.

In terms of capital gains, the two flat is your primary house for the next few years. At least part of the capital gains will not be taxed up to a profit of $250,000. Did you depreciate any of the building for the half you rented? You might owe capital gains on that half of the property.

A good tax accountant could answer these questions for you.

    Bookmark   November 13, 2013 at 3:13PM
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