Market Value for Townhouse in Blue Mt. Beach?

Donna,

What do you mean by "take the tax advantages now rather than wait until you sell the property"? We have two cottages that we rent out that we bought before prices went up so much (but not early enough to actually break even yet on rentals). So, I'm curious about the tax implications of different scenarios. We don't plan to sell for decades (maybe not even in my lifetime), but it's good to know the different tax scenarios. I could ask my accountant, but that question would probably cost me about $200...

Thanks!

Hi, Paula...Any investment (as in rental) property that has a negative cash flow cannot be depreciated on your current tax returns. The cumulative advantage comes when you sell the property only. However, if you can show even a slightly positive cash flow you can take the depreciation now. Although we purchased our home before prices skyrocketed, we still had to do some creative stuff to make it work. Our CPA was very helpful with this. We refinanced into a mortgage that has an option of paying interest only. This brought the payments way down. The property has/continues to appreciate sufficiently that an interest only payment is not risky and actually helps us now. Mind you, we'd never have an interest only mortgage on our primary residence. Most years, we end up with a slightly positive cash flow and the tax advantage is more important to us now than it would be years from now if/when we sell. We will probably be completely retired by then, with somewhat lower annual income.

The mortage we obtained was great, low interest and you quality exclusively based upon your credit rating.