Musings of a Career Consultant

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Owning vs. Renting: And, I’m not talking Real Estate! January 31, 2013

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The Seth Godin obsession continues. The other day he wrote this and I keep mulling it over. I’m not entirely sure what it means to me yet:

You don’t own attention or trust or shelf space. You don’t even own tomorrow’s plans.

It’s all for rent, with a cancellation clause that can kick in at any time.

The moment you start treating the rental like a right, it disappears.

 

10 Expenses You Can Deduct When Renting Out A Room August 7, 2012

Stephen Fishman wrote this great article for Inman News and wanted to share. I’ve rented a room from people and I don’t think they’ve ever taken advantage of these write-offs. I’m giving you money *and* making you money… that’s what I would call a Win-Win 🙂

Lots of people are trying to earn a few extra bucks by renting out a room in their home. This can not only be a good source of income, but result in tax deductions.

If you rent out a room in your home, the tax rules apply to you in the same way as they do for landlords who rent out entire properties. This means you get to deduct the expenses arising from your rental activity.

There is one big difference, however: You must divide certain expenses between the part of the property you rent out and the part you live in, just as though you actually had two separate pieces of property.

You can fully deduct (or, where applicable, depreciate) any expenses just for the room you rent; for example, repairing a window in the room, installing carpet or drapes, painting the room, or providing your tenant with furniture (such as a bed).

In addition, if you pay extra homeowners insurance premiums because you’re renting out a room, the full cost is a deductible operating expense.

If you install a second phone line just for your tenant’s use, the full cost is deductible as a rental expense. However, you cannot deduct any part of the cost of the first phone line even if your tenant has unlimited use of it.

Expenses for your entire home must be divided between the part you rent and the part you live in. This includes your payments for:

  • mortgage interest.
  • repairs for your entire home; for example, repairing the roof or furnace, or painting the entire home.
  • improvements for your entire home; for example, replacing the roof.
  • homeowners insurance.
  • utilities such as electricity, gas and heating oil.
  • housecleaning or gardening services for your whole home.
  • trash removal.
  • snow removal costs.
  • security system costs.
  • condominium association fees.

You can also deduct depreciation on the part of your home you rent.

You can use any reasonable method for dividing these expenses. It may be reasonable to divide the cost of some items (for example, water) based on the number of people using them. However, the two most common methods for dividing an expense are either based on the number of rooms in your home or based on the square footage of your home.

Example 1: Jane rents a room in her house to a college student. The room is 10 by 20 feet, or 200 square feet. Her entire house has 1,200 square feet of floor space. Thus, one-sixth, or 16.67 percent, of her home is rented out. She can deduct as a rental expense one-sixth of any expense that must be divided between rental use and personal use.

Example 2: Instead of using the square footage of her house, Jane figures that her home has five rooms of about equal size, and she is renting out one of them. She determines that one-fifth, or 20 percent, of her home is being rented. She deducts 20 percent of her expenses that must be divided between rental and personal use.

As the examples show, you can often get a larger deduction by using the room method instead of the square footage of your home.

Stephen Fishman is a tax expert, attorney and author who has published 18 books, including “Working for Yourself: Law & Taxes for Contractors, Freelancers and Consultants,” “Deduct It,” “Working as an Independent Contractor,” and “Working with Independent Contractors.” He welcomes your questions for this weekly column.

 

Rent to Own? Why, may I ask? June 7, 2011

I have gotten an abnormal amount of calls over the last couple of months asking if leases are available for “rent-to-own” and I still haven’t figured out the mystique.

Every time I explain my POV (point of view), this wonderful person on the other end of my BlackBerry (yes, I’m with AT&T and, no, I don’t want an iPhone), nods through the phone and picks up the logic I’m putting down.

Here are my thoughts: You’re renting, right? You want to eventually own a place, right? Those are both awesome and okay! How do we get you from one to the next? Probably not with a rent-to-own. Why?

First off, there just aren’t that many out there. In this market, most investors have already seen the tide and they’re staying on their surfboard/in their boat/whatever. They’re going to keep owning their rental so they can keep making money… High fives, them!

Second, the biggest piece of a rental is that it’s not permanent and that once you’re ready for some much-needed stability, you can find it in buying a home of your own. Why take away the flexibility of a rental and commit yourself to this home? What if you have a(nother) kid? What if you change jobs? What if you don’t like that eclectic bongo player next door anymore because you grew out of that phase?

And, lastly, where did you get this idea anyway? Are you secretly reading blogs or articles that I’m missing? I seriously read WAY too much about all things real estate (technology, politics, trends, etc.) DAILY! How’re you reading about the fabulosity of the rent-to-own yet I still want to talk you out of it? Just curious.

End of story? Just rent/lease or just own. Let’s not muddy the waters in between anymore than your Lender would want you to…

Should you have any questions about anything you’ve read here or if you’re interested in another city in Southern California (particularly the San Gabriel Valley or Inland Empire), please feel free to call your favorite REALTOR Smile

And, I can always send you a FREE Market Analysis on your home, just ask.

 

Have $2.7M? Want TV Home? April 20, 2011

One of my favorite Real Housewives is selling her gorgeous home! Why? She’s going through the big “D” and don’t mean Dallas… Divorce for the Gunvalsons!

This charming (at 5,400 SF that you have to verify) home boasts 5 bedrooms and 6 bathrooms and sits on just about an acre of land.

Think it might be too much to commit to the mortgage? Just rent it for a paltry $9,500/month!

Here’s the famous stairs and her office:

Here’s her kitchen… still don’t understand the rooster…

Here’s the pool her son was always drinking in with his friends:

Gotta love this backyard!

Interesting side note: she’s not on title…

All information was obtained through the MLS (except for my tidbits from watching Bravo‘s show).

Should you have any questions about anything you’ve read here, would like more details about Coto de Caza or if you’re interested in another city in Southern California (particularly the San Gabriel Valley or Inland Empire), please feel free to call your favorite REALTOR 😉

 

How’s The Market? March 16, 2011

That depends! Are you looking to Buy, Sell, Invest or Rent?

In Glendora, the average price is $423,273. There’s about 17.18 months worth of inventory which labels the city as a Buyer’s Market (but certain areas of the city are a Seller’s Market). Properties are staying on the market on average 138 Days (and if that’s a regular sale, that’s WAY too long but it’s very understandable for Short Sales). The average price per SF is $263 but make sure you’re reading that right… the AVERAGE. Different communities will have different numbers. And, there’s approximately 171 properties on the market.

Should you have any questions about anything you’ve read here, would like more details about a certain area of Glendora or if you’re interested in another city in the San Gabriel Valley or Inland Empire, please feel free to call your favorite REALTOR 🙂

This information was obtained through Altos Research, LLC.