Anyone here own rental properties?

[Alybetter]

I'd love to chat with anyone who owns a rental property, preferably a long term rental.
Mostly about taxes, but also if you self manage or use a management firm.

Do you do your taxes or use a preparer?
When you are itemizing expenses over 1000, do you list them as assets or expenses?
How do you maximize your return, or minimize what you owe? (If we didn't buy a new roof last year, and new HVAC, we would have owed. Which is crazy to me, I'm not working right now and my husband doesn't make more than 60-70k per year, and we have a child).

We are using a company to manage our Florida house. The do the vetting process, and have stringent requirements. That's one of the main reasons we use a company. But I feel like I'm being nickel and dimed by them for maintenance. I'm lining the pockets of the vendors they use for maintenance, which I'm certain are friends of the two guys who own the company. I also don't like not having direct communication with the tenants. I would love opinions from anyone who self manages, or who has done both.
Our house is located in a market where having a company to advertise your home for rent isn't necessary.

Thanks much.

 

[PierreBear]

We've rented out a property for almost 8 years and with the market improvement and the increase in property taxes, we are finally just wanting to close this chapter of our lives and to sell the property. We always managed it ourselves and that might have been part of the problem. The weekend call that something was broken just made us realize that we have full time jobs and this really isn't a hobby that is fun nor were the extra funds justifying the monthly income. After calculating the return on investment, we would have made a similar amount just investing in stocks/bonds and having less worries. Just our own personal experience though I know plenty of our friends who have rental properties and seem to want to obtain more properties to lease out.

I'm not a tax expert but what I can share is to be mindful of the capital gains tax that you might have to pay out when you decide to sell the place given that it has appreciated in value. I believe there is an exclusion of you lived in the home for 2 years with a 5 year look back. Otherwise, to delay the capital gains tax, one might just have to buy another rental property (likewise exchange) but then you are still stuck in the rental property business.

I'm not sure if this helps but just wanted to share our experience. I'm sure there are others who will chime in and note that it was a positive experience as well! Good luck!

 

[redwood66]

My parents have several and always use a professional preparer for their taxes. They do have a property manager that does the month to month business part of it. But for maintenance the manager must call my parents for repairs over a certain $ amount. My parents are frugal and also very handy so they inspect the problem first and decide if it requires a professional. They have just turned 70 and are letting others handle more which makes me happy. They did buy another rental property when the market return on investment was so poor as they use it for additional income.

 

[Dee*Jay]

Alybetter, I don't currently own rental property but I am both a realtor and a CPA and my boyfriend owns a building.

Regarding self-management vs. management company, it really depends on a few things:
- how close (geographically) you are to the property
- the size of the property (i.e., how many units)
- how handy you guys are and/or how comfortable you are hiring vendors/contractors to make repairs and do other work
- the most important factor being, in my opinion, if you're willing to deal with those middle-of-the night calls. Even if it's a one unit property/single family home) right next door you still may not want to deal with it, in which case everything above is moot

On your question about financial outlays, the general determination of whether something is a expense or a depreciable asset is if the item has a useful life of multiple years. So for instance if you have to repair the mini-blinds in the living room of the unit that is an expense. If you install mini-blinds throughout the unit that is an asset. Here's an article that talks more about the distinctions. https://www.landlordology.com/repairs-vs-improvements-tax-deductions/ IRS Publication 527 also lays out a bunch of info. https://www.irs.gov/publications/p527/ch01.html

For taxes... this will vary from person to person. Are you comfortable with the idea of keeping all the records and muddling through the questions in tax prep software to file yourself, including being able to defend your decisions (e.g., expense vs. asset) to the IRS should you be audited? If not, using a preparer may be the way to go. And if you use a preparer I highly suggest you use one familiar with the treatment of rental properties, not just someone at H&R Block that has an open time slot on the day you want to have your taxes done!

Hope this helps. If you have other specific question let me know (with the caveat that I'm not familiar with your specific scenario and am definitely NOT giving you tax advice) and I'll be happy to try to steer you in the right direction.

 

[Alybetter]

Thanks to each of you for your replies.

I live in a different country entirely from our Florida house, so I'm not close enough to anything personally. Which seemed to necessitate the management company. However, I hate them charging us $80 every time they send their handyman out to do the simplest, 5 minute things. I would almost rather handle the issues myself as they arise. I worked in property management for my entire career, so I'm familiar with the off hours stuff. But living in another country really flubs that up. We do rent out the house for a few hundred dollars a month over our mortgage, which leaves us some leftover to cover these ridiculous work orders.
As far ROI, we bought the house as a foreclosure for a song. It's worth way more than we borrowed, and should maintain its value. Not to mention we upgraded it. Even if the market goes down again, our mortgage is solid at 3.3% interest rate and is quite affordable. So at this point, owning it might not be making us too much money each month, but it is building us equity.

We are presently looking at buying a house in KY and either paying the mortgage on it while it's empty, or renting it to my brother in law, off the books. We're stuck in England until 2019.

I'll have to look into the capital gains tax, I had no idea about it, so thank you for mentioning it. We have that FL house about half paid off and have no intent to sell it until we own it outright, if at all. It may be our retirement house.

Thank you for the expense vs. asset advice. I did our taxes this year, and it seems I did them correctly. I put the HVAC and roof as assets rather than expenses, and it somehow seemed to bring up our return from 300 to 1590. This year I feel confident that we could withstand an audit, we have receipts and documentation for everything. When there are two houses in question, I won't be interested in going though the hassle again. And yeah, if we're going to pay a few hundred dollars to someone to prep our return, it's not going to be H&R. I always used an accountant when I was working.

*I've edited this post because I went back to re read replies.