Renting out primary residence

We have 5 years left on our mortgage and I would like to rent out our primary residence next year and buy another house to live in on a 15 year mortgage.
I'd then sell the primary residence (now a rental) in 15 years.
What's the best way to set this up?
Thanks.

Comments

dan royer's picture

I believe you can do a first change of primary home set for next year where you represent the new home with the new 15-year mortgage. Then, create a new real estate property to be put into service next year with the 5 year mortgage. You can indicate a sale of that real estate property in 15 years.

Does that make sense?

That's the approach i took originally but i'm running into problems.
Under Real Estate you have the two choices of whether you currently own or will buy the property.
If i say that i already own it, it doubles my Net worth because it thinks i own it twice.
If i say that i don't own it, then the software assumes that i'm buying it new and deducts the down payment from my cash flow. If i try and trick it by entering in a "purchase price" that's the same as my outstanding loan, then it doesn't account for the proper amount of appreciation.
Perhaps the easiest thing to do is keep my current house as primary (rental) and buy a "vacation" house. Then i can just account for the rental cash flow somewhere else?

dan royer's picture

Yes, the way you mention would work too. Perhaps it's easier than what I suggested. Cash flow could be handled with special expenses/receipts. With my approach I guess you could give yourself a tax-free special receipt in the same year of the purchase to cover that cost. Either way works--so I'd do what's most intuitive and easy to model. If you have any concerns, let me know and I can run this by Kotlikoff.

Dan

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