First time second home owner/renter

We have never owned a second home nor rental property so I apologize if some of these are stupid question, but we do plan to buy a second home in the near future, so if….

We bought a second home for $200,000 (20% down and $160,000 loan)
If we live there 60 days and rent it 120 days per year and it sits empty the rest of the year.
And we charge $2,000/mo rent plus deposits as follows:
$600 refundable (less utilities and damages) deposit,
$150 non-refundable cleaning fee,
$150 non-refundable pet fee plus
utilities (which will come out of the $600 deposit) and
request $500 of the $2,000 rent up front

(so all deposits - $900 - & the $500 “holding fee” will draw interest until returned).
With the remaining $1,500 rent due upon arrival (or shortly before)

What would our tax implications be?

Can we deduct mortgage interest & realestate tax for the entire year?

I assume we’d claim the “interest earned” on the deposits as income like any other interest earned?

What about insurance, utilities, property manager, cleaning service, home association dues, and depreciation (and how is the latter computed?)

The renter would be paying utilities 120 days, but we would be paying them the rest of the year.

I apologize for this being so complicated, but they’re all questions we need answered.
Thanks very much

You are better off to just rent and then occupy between tenants. If you don't know what you are doing HIRE A PROFESSIONAL PROPERTY MANAGER!!

yes, consult with a professional. Would you really truly believe stranger's forum posts to answer all these complicated questions anyway?

I'd give a professional a call. They work in the industry full-time and important things like this are best handled by professionals.

Good Luck!!

Linda

Home in Lake Tahoe - take a look at lake tahoe real estate (http://www.homeintahoe.com/)

I also agree that consulting a professional, who has experience in this matter, a call.

Yeah. There's only so much help that people on forums can offer to you, so it's best to consult a professional. How's your situation now?

My wife has taken quite a shine to a property located only about 1 mile from my house. About a 1/3 acre lot with a 900 sq. ft home (built in 1955) for a little under $50k. The land value is worth $30k according to our county tax assessor and the structures are about $12,500, so we would have quite some haggling to do to get it down to where I am comfortable.

My wife wants to "flip" the house (Oy! :eek: ), or worst case, rent it out. At under $50k, a complete failure would not kill us, but what a risk! It will have to be completely gutted, and isn't in the best part of town.

Any suggestions, besides telling Mrs. Dingobiscuit, "No way, Jose?" She isn't completely nuts, and we will of course go into the details at great length before making any leap.

In the Dallas, TX area, where property values have been slow and steady upward for quite some time.

DIngo -- I would say, what's up with the home SALE side of your Dallas real estate market? I, too, am in an area that saw only normal, modest gains during the recent "crazy years", but homes just aren't selling very fast. How long can you hold on to a flip before you're hurting, and how likely are you to sell before that moment arrives?

What kind of flip is Mrs. Dingobiscuit interested in? Does she want an outlet for the granite countertops you won't let her have? -- which would probably be too frou-frou for the neighborhood. In short, is she being realistic about the flip? If the neighborhood is as you imply, is she willing to limit the flip to repairing holes, updating plumbing, washing windows, and other really boring and plain aspects of home flipping? -- or is she REEEEELY wanting to express herself creatively, on a home that is not in a location which would make such creative expression profitable?

What are other home values in the area? -- it might be a steal at $50k, but if homes in the area only sell for $70k, that means you can only make $20k in repairs (and have no profit), which is highly unlikely with a complete gutting as you describe. Kitchens alone cost $20k to redo!!!

As far as its being "not the best neighborhood" -- is it a neighborhood on its way down, or on its way up? If down, I say Mrs. Dingo IS nuts. However, if down, then you could be well placed to become a slum lord over a nice little crack house. At least they pay in cash, and are less likely to go through the entire rigmarole of formal eviction procedures, since they really don't want the sheriff to show up. Of course, they keep selling the appliances for ice, but then you just keep outfitting it with mismatches from the Salvation Army.

DIngo -- I would say, what's up with the home SALE side of your Dallas real estate market? I, too, am in an area that saw only normal, modest gains during the recent "crazy years", but homes just aren't selling very fast. How long can you hold on to a flip before you're hurting, and how likely are you to sell before that moment arrives?.



They aren't selling overly fast, but or county was the #1 growing county in the US recently, due to huge job growth in the DFW area. A second mortgage For under $40k (about as high as I would be willing to go on this property, preferably closer to the $35k mark) would be survivable on our income. Rental properties are doing better.



What kind of flip is Mrs. Dingobiscuit interested in? Does she want an outlet for the granite countertops you won't let her have? -- which would probably be too frou-frou for the neighborhood. In short, is she being realistic about the flip? If the neighborhood is as you imply, is she willing to limit the flip to repairing holes, updating plumbing, washing windows, and other really boring and plain aspects of home flipping? -- or is she REEEEELY wanting to express herself creatively, on a home that is not in a location which would make such creative expression profitable?.



No, I offered her $40k in home upgrades instead and she didn't bite. This risky “dream” is partially to make up for some lost income (SSI benefits from our recently HS-graduated daughter) and partially something she’s really wanted to do for some time.



What are other home values in the area? -- it might be a steal at $50k, but if homes in the area only sell for $70k, that means you can only make $20k in repairs (and have no profit), which is highly unlikely with a complete gutting as you describe. Kitchens alone cost $20k to redo!!!.



Home values are about $70-80/sq. ft. in that area, making this one saleable in the $63-72k range.

She’s not looking to net a whole bunch.



As far as its being "not the best neighborhood" -- is it a neighborhood on its way down, or on its way up? If down, I say Mrs. Dingo IS nuts. However, if down, then you could be well placed to become a slum lord over a nice little crack house. At least they pay in cash, and are less likely to go through the entire rigmarole of formal eviction procedures, since they really don't want the sheriff to show up. Of course, they keep selling the appliances for ice, but then you just keep outfitting it with mismatches from the Salvation Army.



It is near downtown which gives it added value, but is near an apartment complex, higher theft, etc. Not outrageous, just noticeably “seedier” compared to other neighborhoods, and she has taken this into consideration (lower-end upgrades, etc.). I wouldn’t say it is a downward-trending neighborhood, just in need of some “suburban renewal.”



If I can get a price tag negotiated toward my suitable price point, and it’s proximity to our home (no added travel time), it has the beginnings of both an interesting project and a bad Tom Hanks movie.