Hubby and I own a rental property that we bought when we were young and dumb and didn't realize all the tax implications of what we were doing. The realtor who "helped" us must have been an idiot and only told us the upside of buying a rental property in the GO Zone after all the hurricanes, not the downsides. The house has fallen in value ever since we bought it (from $145K to $125K), it is geographically far away, and is managed by a property manager. We are just flushing money down the toilet to manage the vacancies, maintenance, etc.
At this point we want to stop hemorrhaging money on this property and have listed it. It is cashflow negative on a monthly basis by $50 (it used to be $200), and that is before vacancies and maintenance, which are high. In trying to understand the tax implications, I now see that we will owe a shit ton of money due to depreciation recapture. Since it was a Go Zone property we took a 50% depreciation in year 1...I want to punch myself in the face for not understanding the tax implications of this on selling the property. At this point, it seems like we can either continue to lose money each year, or bite the bullet and pay $19K in depreciation recapture, plus $2500 in state taxes. That is pretty much all our emergency fund right there (well we'd have a little left over). Everything else is tied up in retirement accounts (about $300K). I just want to cut bait and deal with the loss and move on, even though it is a super painful and expensive life lesson.
What would you do? We are both 39, and have suffered through owning this property for the past 9 years. Would you bite the bullet and just sell at a loss to be rid of it, or continue lugging the anchor down the road...? At this point, since we signed the realtor contract for 6 months, I guess we are on the hook for her fee if we pull the plug before the contract is up.
I hope reading this makes you feel better about all your life choices! At least you didn't make this decision! haha