In-laws with some pretty serious debt, need some advice!

[Catbert]

Capital gains for a rental house will be higher than for a principle residence.  On a principle residence (assuming you meet all requirements) the 1st 500k for a married couple is excluded (i.e., no tax owed).  No such exclusion for a rental.  Plus for rentals the IRS will recapture the depreciation taken on taxes over the years.  Most will be taxed at 20% but it could be higher if total income (including cap gains) goes over a threshold...something like 400K.

Still not a reason to not do it.  As time passes the capital gains will just get larger.

[Mr. FI]

Capital gains for a rental house will be higher than for a principle residence.  On a principle residence (assuming you meet all requirements) the 1st 500k for a married couple is excluded (i.e., no tax owed).  No such exclusion for a rental.  Plus for rentals the IRS will recapture the depreciation taken on taxes over the years.  Most will be taxed at 20% but it could be higher if total income (including cap gains) goes over a threshold...something like 400K.

Still not a reason to not do it.  As time passes the capital gains will just get larger.

Yes, that's how I understood it too. But their total income won't come near 400k.

[NoWorries]

If this were me and my in-laws, well, MIL probably would think anything I suggest would be too drastic. But in any case, I’ll lay it out—this situation doesn’t seem that hard to me:
•   Sell everything in the storage unit. Or just throw it away.
•   Forget about repaying the relatives right now, that can be done in a few months
•   Sell the rental house. Hopefully worth enough that they can pay off that mortgage, the credit card fees, and the family debt.  IT IS JUST A HOUSE
•   After that, start either aggressively paying towards retirement or the other mortgage. Their choice. And cut the GD spending.


Really no reason to do an FHA loan or anything else. They can't afford two homes, they need to sell one. Or else make them raise the rent, but frankly that would be too slow.

+1

You can lead a horse to water...