HELP! Need advice about condo property that I need to get out of.

Beware of the Trolls

I'm sorry if this isn't a troll, but maybe you could find work as a posterboy for the real estate bubble. You're right out of central casting:
Condo
2005
Las Vegas
Investment opportunity
Interest-only
Had no idea about the local market even at the time

While you're right this was a horrible mistake, it sounds like you are well equipped to deal with it. The simple answer is to sell it for about $350,000. You may be able to convince the mortgage holder to accept a short sale, where they absorb the loss in value on the property. But frankly, they'd be foolish to go for that since it sounds like you have more than enough assets to cover the loss. But that's the worst case - you've lost a few hundred thousand dollars plus monthly negative cash flow. Things aren't going to get better for you by waiting. Similarly, bankruptcy probably isn't an option for you - it sounds like the BK court would find that you can pay your debts.

Man, it wasn't even just 'a condo', it was a *really* expensive one for the area.

Quit blaming the whole thing on the agent. Accept some responsibility, you should have done your own research before purchasing the property.

Why can't you let it go into foreclosure and walk away?

Trust me, I've learned my lesson. There are no shortcuts to making money. If I just stop paying the loan and give the keys back to the bank, is there any other downside besides my credit rating dropping? Will they come after my other assets?

The other question I had was is there any way of writing the condo payments or the loss that I take on the property after I sell it as a business expense? If I could write off some of that, it would help in stomaching it considerably.

Also, I'm not blaming it on the agent. It was a stupid investment on my part and I should have done more research before making such a big purchase. I'm just trying to deal with the aftermath now.

Where do you physically live? In which place? Or do you rent if so how much rent do you pay>?

It's not. I was just wondering if there was any way of twisting it so that I could write it off. I own my home in a Chicago suburb. I bought the condo in Vegas as an investment

Ok so if you have a paid for house in Chicago then use a heloc to get this house low enough that you can sell it. Then pay off that heloc.

jhancock, do you mean you have not been including this money-losing rental property on your taxes? You should have been doing that every year, just as you would if it were turning a profit. Schedule E.

However, there is an income limit that likely prevents you from being able to use the losses to offset your taxes due on other income. You can only claim $25k per year in losses in any case, and this phases out with an AGI over $100k (and is gone completely at $150k). Any disallowed losses can be carried forward to future years when you may not hit the income limits.

It sounds like you need to hire a competent tax accountant, I'm not nearly close enough to that for you to rely on my word with so much money involved.

SlimTim said: However, there is an income limit that likely prevents you from being able to use the losses to offset your taxes due on other income. You can only claim $25k per year in losses in any case, and this phases out with an AGI over $100k (and is gone completely at $150k). Any disallowed losses can be carried forward to future years when you may not hit the income limits.That's correct with a few clarifications. If you do not qualify as a "real estate professional" within the meaning of the Internal Revenue Code, your passive loss limitation (with a few exceptions, rental income and rental losses are deemed to be passive to investors) is $25,000 per year, which means that in a given year you can only deduct up to $25,000 in passive losses against ordinary income (you can still deduct the full amount of your passive losses against passive income).

To the extent that the investor's modified adjusted gross income exceeds $150,000 in a given year, you may no longer deduct any passive losses against the ordinary income (you can continue to deduct all the passive losses against passive income).

Disallowed passive activity losses are not lost, however. They are simply carried forward and, if not used up, will be fully deductible without any limits when the subject property is disposed of by the investor. If the property is sold below your basis, as adjusted for depreciation deductions, there is also no depreciation recapture on the passive activity losses.

Capital losses associated with the sale can be fully offset against all capital gains. If capital losses exceed capital gains, however, they can be carried forward and deducted at a rate of $3,000/year against ordinary income.

In other words, if, in simple terms you had purchased a property for $500,000, had $100,000 in passive activity losses which you could not deduct because your income was too high and subsequently sold the property for $350,000, you will be able to immediately deduct $100,000 in previously disallowed passive activity losses against your ordinary income regardless of how much money you made that year. In addition, you will also be able to deduct $50,000 in $3,000/year increments against your ordinary income (or in full against your capital gains) regardless of your income until the $50,000 is exhausted.

In another example, if you had purchased a property for $500,000, had $100,000 in passive activity losses comprised entirely of real estate depreciation which you could not deduct because your income was too high and subsequently sold the property for $460,000, the $60,000 portion of your passive activity losses will be recaptured and taxed at 25%. If your top marginal tax bracket is higher than 25%, you will come out ahead by the difference between the tax brackets. You will also have a $40,000 passive activity loss, which you will be able to immediately deduct against your ordinary income without any limits.

P.S.
The $3,000/year capital loss rule applies if the investment property is not considered a "trade or business." This will be fact specific but for people who do something else and just own a single rental property on the side, there is a good chance that managing the rental property won't be deemed to be a "trade or business," so that the loss will be capital in nature and the $3,000/year capital loss rule will apply. If you are, however, able to meet the requirements for a "trade or business," the entire amount of the loss will be immediately deductible against ordinary income in the year that the property is sold.

jhancock12345 said: The other question I had was is there any way of writing the condo payments or the loss that I take on the property after I sell it as a business expense? If I could write off some of that, it would help in stomaching it considerably.Absolutely, please see my explanation above. Judging by your posts, you would in fact have considerable tax offsets available to you once the condo is sold. It certainly doesn't make the situation peachy but the considerable tax savings that you are looking at might make your losses at least somewhat more palatable.

By the way, although hiring a good tax accountant is never a bad idea, if you aren't already using someone, I wouldn't necessarily spend money on an accountant just because of the condo. This situation is actually not particularly complex and can be handled quite well by tax software, such as TurboTax.

I applaud the doctor for realizing his situation and doing something about it, instead of just buying his head in the sand and hoping the problem disappears.

1) Holding out and waiting for the rebound is not an option for many as values will never rise enough to make them whole
2) Use Geo's advice to write off tax losses if possible
3) Sell at a major loss and move forward. There is no quantifying the problems and stress that dealing with this condo for years.
4) Check to see the ill effects a bankruptcy/foreclosure will have on your livelihood

Good luck.

Ummm, you are a family practicioner? oh, okay a family practice physician AND...

Don't you have an accountant? If you don't you should and that person would be a source of advice; not a forum like this.

If you are not a troll, then hire an accountant (LEST FOR YOUR PRACTICE) and if you are a dr. you should have a few lawyer friends to whom you can seek legal advice about walking away or working with the bank.

Probability OP is a troll? I gauge it at 85% anyone else have a guestimate?

Gosh, I forgot. You are talking Vegas right? Why not double down and buy a second condo. This one at $350k and then you only need the condo to go to $500k and you are back even. Keep chasing and eventually you'll double up and get back to even.
jhancock12345 said: Hi everybody.

I am family practice physician and own my practice.

I think the answer has been stated.

Either walk away and take the hit to your credit:

Sell the property for the $350K and take the loss. If your making the money to pay your bills and still pay $5K/mo on this place, you make enough income to take the $150K loss off on your taxes.