I bought a house in Tracy in 2017 summer. We remodeled the house and tried to rent it out for the last couple of months but haven’t been able to find a renter yet. We have now changed our mind and want to sell the house and take the loss.
Since the house was never rented, will this be considered a long term capital loss? If not, is there a way to offset the loss by selling another investment or stock?
I talked to my tax consultant and he was saying that there are conditions where this might be treated as a flip and won’t be treated as a long term capital loss. Can you please post some suggestions on how to deal with this?
Don’t sell. Reduce the rent. Find section 8. Many ways to deal with this.
Market slowed and we already have people talking about loss. What a change!
For capital loss, why do you care whether it’s short term or long term? I think you only care about long term or not when you have a capital gain.
When you buy a house, be prepared to hold for decades. Otherwise, don’t buy.
Tracy is a small city, not sure whether you can find section 8 tenant. I tried to find a section 8 tenant in Arizona but no one responded. Are there more section 8 vouchers in blue states?
Loss is loss. You need a new accountant
That’s why you need to buy near where the jobs are.
@wuqijun, What’s the logic behind not selling if they lower the rent and go cash flow negative for years?
The real question is why it wasn’t flipped a year ago. Flips should be done in 3-6 months max.
Some posters will tell you to hold on to it. Are you willing to sustain a loss every month? Prices are not increasing in certain areas, is yours one of them?
Are you watching the market saying good bye to the old good times? I am not an expert on the economy, but we won’t see any real estate market as the last one that ended a few months ago.
I think we reached the famous peak, and perhaps we are going down its mark.
Experts on flipping, or investing will tell or suggest you what to do.
Me? I don’t like RE investing, not at all!
@buyinghouse, wasn’t there a famous peak every decade? It’s always followed by end-of-the-world predictions. Is this something new? What happened to all the people that sold after the peaks of those decades?
Let me put it this way. We were hesitant, but thinking about selling our home in the $900Ks, or who knows, $1M as naïve as we are. That won’t happen any time soon. The bubble burst as far as I am concerned, at least in my area. It could be the end of the year, tariffs, whatever.
My South Bay property has been cash flow negative for years. I don’t have any intention to sell it though.
@wuqijun Is it cash flow positive or neutral if you consider principal part of the payment? How long did you have loss despite the principal portion?
I recall my landlord in Visalia was a RE broker. He asked me to get my RE license, which I did, I was in the process then. When I got it, I ran to his place and very humbly presented my license and expected to start to work ASAP. He then made that famous joke of rolling that piece of paper and stick it somewhere.
I asked why? He then said: Look, I know the market, something is going to happen, I start to see prices freezing, denials for loans, and homes not selling. Then he suggested me to take a look at the for sale signs on the streets. I did. And I started to notice there were one, then two, then three on the streets.
Of course, those were different times with the liar loans available to anyone who asked for them. With plenty of jobs in the silicon valley and vicinity, I don’t know, I can’t predict anything nor I can say something will happen or not. I just know the confidence in buyers is worrying the Realtors I talk to in a weekly basis.
It’s negative because it’s a million dollar property. Don’t expect to achieve positive cash flow at this price range.
Exactly, that is BARE !
Like WQJ, all my properties (except 1) are negative cash flow since day 1, hanging around more than 12 years, filing loss year after year. It is too difficult to explain without showing all my records open, but it is true.
Bay Area real estate, other than some east bay, results negative cash flow, but appreciation is positive which is not taxable event until we sell.
Like WQJ said, do not sell, reduce rent, hold on to it for 5 to 7 years to reap the benefit.
There is no short cut.
If you are real estate licensed professional (which I hope you are not), you can wash off loss with other income. You need have 720 hours/year worked in real estate business to qualify.
If not, rental is considered passive loss and that can be washed off by another rental gain, but can not be washed off with your W2 or 1099 or stock investment income.
All my property is cash positive. I look for a minimum of a 5 cap and pay cash. Rising interest rates make low cap property less desirable. Rising rates are definitely scary for investors. Probably the number one reason for the current pause in appreciation. How long will BA investors hold on in a zero or negative appreciation environment?
Why, you want us to sell on the cheap so you can benefit?
No. I just wonder if the FED kills the appreciation party, will investors hold on and for how long? For a primary home probably forever, but if cash flow is negative with rents and values dropping some investors like the one in Tracy will sell.
Tracy is a cheap place where homes are seldom cash flow negative.
Right, why would you own cash flow negative properties in non tier one cities?