I have a degree in Accounting (but don't currently practice and never tried to get my CPA) and have always done my own taxes (as well as friends and familes). But with all of the tax changes that have taken place and my growing tax contributions, I thought it was time to see a CPA for 1) verification that my tax returns were properly completed and more importantly 2) advice on possible actions to take to soften the tax bill.

Unfortunately, my returns were fine (was hoping I somehow missed something good), and because most of my income is W-2 based, there are not many places to get a benefit for me.

We did discuss Real Estate, my wife and I have had different opinions on this subject. I would like to invest in a second home in a nice vacation spot and she would rather invest in a house that needs work, fix it and sell it, or in local rental property (house, condo, co-op).

I have always been hesitant to buy rental property for fear of the 'bad tennant'. Am I being overly cautious? Anyone have good or bad experiences?

Vacation houses have a good and bad attributes too. There is upkeep and the fear of always going there for vacation and not going to other places.

Thanks,

 

If it floats, Flys, of f***s its cheaper to lease it. Rent to students get all $$$ up front then keep hefty damage deposit, bring in fire hose, hose it all out, let dry, start out with next batch of students. Vacation porperties are a pain. You never relax always maintanence that you want to do or add. Use income form rental porperties and take trips everywhere. I'm still teathered to family lake home. Owned a ski condo for 3 years and spent less time skiing due to ownership. Now have a rental property rented out to a university men's swim team. Beer is always cold and money is green.

 

We have several clients who run rental properties. They all say it's harder and more time consuming than you'd think what with upkeep, repair, tenant issues, etc. Some of the successful ones have bought nice townhomes and lease them to large companies such as BMW (right down the road from me!) or Michelin who need them for personnel they bring from overseas for extended periods of time.

If you do decide to buy some rentals, please make sure you put them into some kind of business entity, like an LLC, to limit your exposure in the event you're sued by a tenant.

 

[QUOTE]Originally posted by Nickfromny

 

Jim, the easiest way to get into this is to buy a vacation home in a desireable vacation area. Use it for one or two weeks a year, then rent it by the week for the rest of the season. People do this down the cape all the time. The weekly renters can't "hold over" without paying and you get a big security deposit. A realtor takes care of all the business stuff and you can get enough to pay most of the mortgage at the right location.

 

Jim

Like everything else in life there is always more then one way of looking at this issue. I have owned a vacation/weekend/summer house, and I have quite a few clients who own rental property. There are advantages and disadvantages to both.

Vacation/weekend/summer house

We owned a house on three acres of land in Woodstock, NY. We loved the house, the community and everything about it. We'd go up just about every other weekend, and often spend a week there in the summer and a week there in the winter. We sold it two years after we moved to New Jersey.

After we sold it (at a slight loss as we sold just about the time that IBM was closing it's Kingston, NY plant) we came to realize what an enormous expense owning the house was. Not only were we paying real estate tax in two locations, but we had to heat the house (to 45*) to prevent the pipes from freezing and pay for all of the usual (security, snowplowing, maintenance) expenses. Not only that, but as much as we loved owning the house and Woodstock, we found that we had to choose between a little league game and going upstate, or a party with our friends and going upstate. After a while, we found ourselves using the house less and less. Still, we'd worry about the roof in a heavy snowfall, or a burglary or fire. And when we did get up there some of our time was spent cleaning, mowing, maintaining and etc.

Often we'd find that the item we wanted to use, a tool, a piece of clothing etc was in the other location. So we ended up with a lot of duplicates but still, when we were in Woodstock, the shoes we wanted to wear, or the wrench I wanted to use was in the city. When we were in the city, the thing I wanted, needed, was in Woodstock. Plan as we might, it always happened. When we sold Woodstock and consolidated we had so many duplicates that we filled two trucks for the Market Street Mission here in NJ.

Worse still was the fact that by owning the house we felt compelled to vacation there. For years and years we vacationed in Woodstock instead of going to different places. In a way, owning the house limited us to Woodstock. Once we sold the house we decided to vacation in a different area each year. Its more fun that way.

Rentals

Many feel this is the ideal way to have income and to acquire weath. The tenant is, afterall, paying the mortgage and helping you to gain ownership. This may be true, but oftentimes the rental runs at a loss. Especially if there is a turnover of tenants or the property goes unrented for a period of time. Many of my clients have experienced this.

Additionally, the wear and tear on a rental piece of property can be extensive and keeping the property in good repair can be expensive to the point of causing a loss. Also, there is the aggrevation. Ultimately, you are responsible and you are at the beck and call of the tenant. There are management companies that can do some of this, but they are expensive and not likely to be a viable alternative for a single family house.

The point is in a rental you need to be prepared to give it some time and to lose money. Both are very possible.

Still, in spite of everything that I've said, many people own vacation homes and rentals. It can be done. Just know what you are getting into.