A brief look at tax issues you should be aware of when buying multi family homes in foreclosure
Buying multi family homes in foreclosure may be a good investment because you can live in and rent out the property. Before you make the decision to buy a multi family home in foreclosure, you need to think about the tax issues that might arise from such a purchase.
Liens or encumbrances one of the first tax considerations when buying multi family homes in foreclosure is that the property might have tax liens against it. There is a chance that you might have to pay back taxes or resolve past tax-related liens when taking over ownership of the property. This is just one good reason why you should thoroughly research the property before buying.
Tenants and taxes one of the advantages of a multi family property is that you can generate income by renting out living space to tenants. This will generate a number of unique tax issues. For one, you need to pay taxes on the entire property even if you don’t have tenants whose rent can offset some of those tax and related expenses. You will also be faced with a tax event on the rental income you do collect once you attract tenants.
Another multi family home in foreclosure tax issue occurs if you decide to live in the building. You can then only deduct a portion of your mortgage on your taxes. You need to determine the square footage of your living space in relation to the size of entire building before making a deduction.
Purchasing a multi family home in foreclosure can be a good investment, but determining how good and securing long-term success will require you to consult qualified real estate and tax professionals. RealtyNow can help you in this endeavor by connecting you to local real estate professionals eager to assist you.