Quote:
Originally Posted by blankall
Considering buying a condo for rent. Let's say I earn $1000/month in rental income. I pay $100 for insurance and $150 for condo fees.
I have the option to go with a 30 or 25 year mortgate. The former will cost me 900/month, which will result in a 150/month loss. The latter will cost me 750/month which will allow me to break even.
Can I write off the 150/month loss if I go with the shorter mortgate term?
All help is greatly appreciated.
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You seem to be getting your accounting terms confused.
My understanding of your situation (very simplified, consult your own accountant):
Revenue:
Rent $1,000/ Month
Expenses:
Insurance $100/month
Condo Fees $150/month
Interest ~450/month (Lets assume it is about half of your mortgage payment)
Depreciation $0 (Talk to your accountant so I will assume $0)
Property Taxes $? (Not sure if this is include in your mortgage)
Income:
Revenue - Expenses= $1,000 - $700
=$300 (you would pay taxes on this amount)
You seem to have confused Revenue with Income, and Income with Cash Flow. Your taxes (and write-off) are not determined by your monthly cash flow, but by your annual income.
You should also be factoring in your cost of capital (alternative return on the value of your downpayment), as well as the fact that with historically high rental rates and historically low interest rates you look to have negative or marginal monthly cash flow - not a good situation.