Thinking of selling our rental property

Location of rental?

Compare the NOI (net operating income) and debt payment (if any) on the rental to interest expense on whatever loan you are going to pay off.

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Right now we are pretty much at a point where we arent able to save money monthly with both mortgages and a car note, student loan, etc.

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So what happens when something big breaks on the rental property and you have to spend $3,000 to get it fixed? Do you have the money for that? Do you have the ability to finance that?

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Also, for a year we are going to one income because she starts school in june.

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If you can't save additional money now with two incomes, how are you going to be able to live on one income?

I think you had better take into account the tax implications of selling the property. You need to know what taxes you may have to pay on the sale due to your basis in the property now that you have taken depreciation expense on the rental. If you have a tax adviser, I would consult with him/her before you do anything.

We lived in the house for 7 years before we borrowed against it to byy our residence now .

We still have quite a bit of equity in it as well.

What would some of the tax implications be?

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We lived in the house for 7 years before we borrowed against it to byy our residence now .

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If you have resided in the rental house for 2 out of the prior 5 years the house can be sold and the sale of primary residence exclusion of $500,000 for married couple ($250,000 for single)can be used to offset the gain on sale.

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We still have quite a bit of equity in it as well.

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Equity is not a factor in determining gain on sale.

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What would some of the tax implications be?

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You will be taxed on Gain on Sale

Basically:

Sales Price - Selling Costs - Basis + Depreciation = Gain on Sale.

Another factor to consider is how was the property acquired:

If purchased by you, your basis in the Property is purchase price + any additional costs of improvements that you can document less any depreciation taken on the rental.

If inherited or received as a gift from a still living relative, your basis will be the same as the basis of that relative plus any additional costs of improvements that you can document less any depreciation taken on the rental.

If inherited from a deceased relative it becomes more tricky to calculate basis. Due to the death there is a step up in basis to either the Fair Market Value of the Property at date of death or the appraised value of the Property at date of death. Very seldom is an appraisal made at Date of Death unless we are talking about an estate of over $5,000,000 for the prior few years. Obtaining a Fair Market Value appraisal for an at least 8 year old transfer of Property is difficult.

Hope this helps.

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Sales Price - Selling Costs - Basis + Depreciation = Gain on Sale.

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Key is "+ Depreciation" - you have to recapture

stephen H?