I live in SF Bay Area. I recently purchased a new primary home and am trying to figure out what to do about current home. I have 3 options I am considering:
Option #1: Sell. I would loose approximately $100-$150k after closing costs. Hard pill to swallow but is the cleanest and easiest.
Option #2: Rent on Airbnb. Take advantage of bonus depreciation. I know there are crazy rules I have to follow and hoops to jump through but Immediate tax savings of about $100-$150k. Cash flow wise would probably loose $2-$3k/month. I am interested in running an Airbnb.
Option #3: rent long term. I would probably loose $1k/month and couldn’t take advantage of the bonus depreciation.
What is the best option given my situation. What am I not considering? How would you go about out it?
Need Advice: I am trying to figure out what to do with current home. Sell for a loss? Airbnb? Long term rental?
byu/tikivibes inrealestateinvesting
Posted by tikivibes
14 Comments
The property would have better cash flow as a LTR vs STR? That is unusual.
~~If you lived there for 2 years you can sell it without paying capital gains tax. All of your other options are going to have you text when you finally do sell the house.~~
Being a landlord is really hard to be successful for a single house when you don’t work in the real estate industry and don’t have experience with it.
You’ll probably have a competitive rate of investment with the s&p 500 and way less hassle.
If you were experienced in real estate or worked in the industry I would say that you could make more than the s&p 500. Off the top of my head I would guess probably 50% more. But if you don’t have experience then it’s just a higher liability and less guaranteed of a return rate
If you go the STR route make sure you can get a license and account for furnishing costs. The place has to look very nice and you would be going into the hospitality business.
Feel free to PM the address and I can send a full Airdna report.
air bnb is a scourge upon the housing market. i vote LTR or sell
Keep in mind if you use bonus depreciation on the house then you will be subject to repayment of this depreciation if you should sell.
No way in hell would I ever consider selling.
Option 1. Painful, but then you can move on in life without further opportunity costs.
How would you make less money with airbnb than LTR? STR should be 2-3x, avoid restrictive LTR renter laws, and pick up favorable tax laws. If you’re interested in airbnb’ing and live nearby, then this is a good choice, and what I do! (source: I have both LTR and STRs)
There are salary caps for bonus depreciation. Based on this post I assume you would not qualify for bonus depreciation.
I would recommend STR or LTR. I’m not sure how you came up with a 2k a month loss on STR.
How did you end up in this situation where you are so underwater and still decided to buy a new house?
*lose, not loose
Keep the home if you can withstand the short term losses (which even over the course of several years will be less than 100k-150k loss if you sold now) until the market shifts you will eventually get out from underwater. As long as there are more people (the US has a growing population) the demand for land will increase and the property’s value will follow suit. This a super simplified view of the complexities of real estate markets but it still stands true.
One of the few factors that could deflate value regardless to demand over time is if your property is located in a high risk area, flood, or fire, etc. if that’s the case then you should probably not have bought in the first place and you might as well sell.
It is unclear. The options favors real and depreciation losses. Without knowing more about your tax situation, it is unclear how the losses will flow through.
AirBnB would mean you are taking on an active side hustle. Unclear what the demand would be vs any other property you are competing with.
Future appreciation is unclear and a bit dependent on the home’s location.
I am not requesting you share more about your income and tax status. I am stating the choices are unclear until a lot more info is added to the mix.
Long term rental. The property prices will increase- they always do. (SF landlord)