Hi,
We currently own a home but are also purchasing another home to move into in a year. We planned closing on the purchase in September, renting out the house until the renovation plans were finalized in February (to either profit or cover some/all of the carry costs), starting renovations in March, and moving in during the summer. We secured an investor mortgage just to keep the paper trail clean. The seller expressed interest in staying so we wound up doing a use and occupancy agreement for 5 months, but at a rate below market rate and below our mortgage payment and taxes. While the rate was lower, it was easier to keep the sellers in the house rather than finding a short term renter and dealing with a tenant. For ease of numbers, say they agreed to pay $3000 in rent, our mortgage payment is $5500 (with $4000 in P&I and $1500 in taxes), and the appraised rental market rate was $5100.
Questions are..
1) Is there a loss to take here somehow and is that deductible?
2) Are there any other deductions that can be taken?
3) Can you deduct mortgage interest or taxes on both properties?
4) If I do any work to the property or fix any issues while they are there, is that deductible?
5) How do you express this in TurboTax?
6) Are there any considerations I am missing?
Thanks!
