When your house is no longer your home

Life changes, such as a  new job, graduate school, divorce or marriage, often cause folks to rent out their home, while moving to another.  Sometimes, when you move out, you think you'll be moving back in, so it doesn't seem like a big deal. 

But to the IRS,  "big deals" may be happening.  I'm not an accountant, and I don't know the tax code.  But here are a few things I have seen. 

In general, when you sell a personal residence, even if you sell for a gain, there is an exemption so you don't pay taxes on the gain; something like $250,000 of gain for a single person and $500,000 of gain for a couple.  So, most likely, if you sell your home, make a bunch of money and don't reinvest it in another home,  you're okay.  But...when you move out of your house and rent it out, you are functionally, converting your residence to investment property.  There are intricate rules (this is the IRS after all), but depending on how long you lived there and rented it out, when you sell, any gain will most likely be taxed as regular income.  That means, whatever your tax rate is, will be applied to the gain when you sell.  Ack!

And, that rent you've been getting?   That rent is income, and should probably be claimed on your taxes as such.  Now, with investment property there are several nice tax deductions that help lessen the tax hit of the rental income.  And, you may well depreciate the property.  But, you'll need to be claiming the income.

Rental property is often the threshold beyond which folks choose to have their taxes prepared by an accountant.  Especially if you are a new landlord, a professional guide through that part of the IRS code can be a good idea. So if you kinda ended up as a landlord unintentionally, think about getting some help.

ps.  Many people intend on becoming landlords, purchaser property with that specific intent and embrace tax strategies around investment property.

Still busy

The Portland market continues to suffer from low inventory, with only 2.8 months of houses on the market.  At our current rate of sales, it will take 2.8 months to sell all the properties on the market. We haven't seen lower inventory since May of 2013. This, with listings up 17.4% from March 2014.  As market times have decreased, the increased inventory is absorbed.

Pending sales were up 11.5% from March 2014, but down 4.0% from April of 2013.  Closed sales rose 15.4% from March 2014, and showed a slight increase of 0.8% from  April 2013.  Spring of 2013 was a kickass market, maybe even a bit too kickass.  So being "flat" compared to last year is fine by me.

Our market time got a tad shorter in April; 77 days vs. 85 days in March.  April 2013 had a market time of 91 days.

The median year to date sales price is $275,000, up 10.0% from the median year to date sales price in April 2013 of  $250,000.

So, prices continue to increase, we've had a slight increase in the number of houses on the market, but the pace of sales and number of active buyers make for a busy real estate industry.  There is still a lot of cash in the market, making it harder for first time buyers, with low down payments, to compete.

There is still time to get your place on the market if you've been thinking of selling. Give me a call. 503-312-8038.  Buyers, there is hope, with 2143 closed sales in Portland last month, clearly some folks are getting their offers accepted.


Read the full report for the Portland Metro Area

Why zillow "can't get no respect"

Zillow is a mega huge website with a bunch of real estate data. The site has some fun tools.  It pulls data from a variety of places, the risk of which is a crappy quality of data.  I do take a peek at zillow when I'm working on pricing a property, not because I value the "zestimate", but because I know my client will have looked there.

Most of zillow's real estate pricing is based on using comparables, similar to how real estate agents and appraiser consider value.  But zillow hasn't figured out how to account for things like busy streets, unique locations and views (unless all the comparable properties share that feature).

My house, for instance, is on a busier street. So zillow always thinks its worth quite a bit more than I.

I had a recent listing sell, and found the zillow information to be rather amusing.  The house was listed at $307,000. We closed the sale at $320,000 just weeks ago.  Zillow's zestimate lists the value at $299,872.  You'd think, within a certain amount of time, that big daddy data masters, zillow, would take the sales price from an open market listing as the value. The commonly accepted definition of real estate value is" what a buyer will pay and a seller will take, when a property is sold on the open market".

Maybe zillow's definition is different; what a buyer will pay and a seller will take minus 6.25%?

Have you been eyeing your zestimate?  I'm glad to give you  a more informed opinion. Give me a call at 503-312-8038 or email leslievjones@gmail.com.