Seller wants to rent for few months after the closing
- Thread starter NeedHome
- Start date
NEW -> Contingent Buyer Assistance Program
uhhhhhhh ... well... you know you can ask for cash.
Another thing (and I'm not recommending this)... I'm not sure if every buyer who engages in a rent-back agreement actually reports it on their taxes because it is not an income producing scenario. You really should ask your realtor (and accountant) about any tax implications and requirements.
As a CPA, who went to usc I can tell you this is not quite accurate
The principal is not an expense/deduction. The correct calculation is rent - interest - taxes - insurance - hoa - gardener - other expenses you incur - depreciation.
Technically u have to report this income but most people wouldn't.
I'm also a CPA who went to USC with a M.Acc and BS, but my disadvantage is I'm just a dumb black dude who hasn't practiced accounting for over 10 years ;D
Seeing this type of deal more frequent lately. One of my old neighbor sold his home but rented for one year before moved out.
He's wants to get a new house but does not want to be a contingent buyer. He wants to free up the down payment for the new house and also don't want to move twice.
He's wants to get a new house but does not want to be a contingent buyer. He wants to free up the down payment for the new house and also don't want to move twice.
J
jmoney74
Guest
NeedHome said:
uhhhhhhh ... well... you know you can ask for cash.
irvinehomeowner
Well-known member
This is actually pretty common.
We've had to rent back more than once.
From the buyer side, the tax implication isn't that high because you usually create the rent back agreement so it covers the buyer's principal and interest (unless it was an FCB transaction... then both seller and buy agree on a fair or even below market rent).
But from a buyer's standpoint, I do think it's a bit risky as you have to hope they keep your home in good condition while they are renting back. From a seller, if you are responsible, it's a bit surreal making sure you don't mess up a house you use to own and now don't.
We've had to rent back more than once.
From the buyer side, the tax implication isn't that high because you usually create the rent back agreement so it covers the buyer's principal and interest (unless it was an FCB transaction... then both seller and buy agree on a fair or even below market rent).
But from a buyer's standpoint, I do think it's a bit risky as you have to hope they keep your home in good condition while they are renting back. From a seller, if you are responsible, it's a bit surreal making sure you don't mess up a house you use to own and now don't.
Very hard to sell and buy houses and have them fall like dominos all at the same time. New buyers or elderly getting out of the market are the only ones who can move easily.! Check with YOUR bank though. I could very well be wring but I thought anything over one month rent back is considered a rental property not primary residence and there are money issues not in your favor if that is true. If you give them 30 days, they can find somewhere else to rent.
Yes , I am not looking at making money out of it but to cover my expenses. We are just getting another rent increase ( joys of Irvine company) and are on month-to-month so want to get out of it as well.
>>From the buyer side, the tax implication isn't that high because you usually create the rent back agreement so it covers the buyer's principal and interest
If they rent for two months and the mortgage + Interest is 4K , then doesn't it add 8K to my 2014 income on which I will have to pay 43% tax ( our highest bracket will fall into the zone of 33% Fed and 9.3% State )
Another tangent question: The property is in Northwood area with no HOA , is there a danger that the neighborhood can go south because of no rules around curb upkeep?
>>From the buyer side, the tax implication isn't that high because you usually create the rent back agreement so it covers the buyer's principal and interest
If they rent for two months and the mortgage + Interest is 4K , then doesn't it add 8K to my 2014 income on which I will have to pay 43% tax ( our highest bracket will fall into the zone of 33% Fed and 9.3% State )
Another tangent question: The property is in Northwood area with no HOA , is there a danger that the neighborhood can go south because of no rules around curb upkeep?
irvinehomeowner
Well-known member
Not sure how it works on short-term rental agreements like rentback (or if there is even a new provision to cover these type of arrangements since this is not really a rental income arrangement) but for a rental property, there are calculations that take into account mortgage, property tax, insurance and other costs against the rental income. If the rent-back amount you negotiated with the seller is in line with your P&I, it will probably wash out as very little or even negative income (but I'm not a qwerchete so don't quote me on this).NeedHome said:
Another thing (and I'm not recommending this)... I'm not sure if every buyer who engages in a rent-back agreement actually reports it on their taxes because it is not an income producing scenario. You really should ask your realtor (and accountant) about any tax implications and requirements.
sgip
Well-known member
Check with your lender and get confirmation in writing that a rent back greater than 30 days is acceptable. There are situations where any rent back greater than 30 days is going to viewed as a purchase of a rental, not an owner occupied transaction. Some lenders also consider this as a concession which impacts the sales price of the home. Rent backs can be considered inducements to purchase depending on each lenders unique guidelines on the issue. Stupid? Yes, but one can't blame lenders for tightening up on things like this given all of the straw buyer problems over the past 8 years.
qwerty
Well-known member
Tyrone Biggums said:
As a CPA, who went to usc I can tell you this is not quite accurate
The principal is not an expense/deduction. The correct calculation is rent - interest - taxes - insurance - hoa - gardener - other expenses you incur - depreciation.
Technically u have to report this income but most people wouldn't.
NASCAR24
Active member
qwerty said:Tyrone Biggums said:
As a CPA, who went to usc I can tell you this is not quite accurate
The principal is not an expense/deduction. The correct calculation is rent - interest - taxes - insurance - hoa - gardener - other expenses you incur - depreciation.
Technically u have to report this income but most people wouldn't.
I'm also a CPA who went to USC with a M.Acc and BS, but my disadvantage is I'm just a dumb black dude who hasn't practiced accounting for over 10 years ;D