You should really take a step back and consult a good accountant that handles PA and NJ. I moved to PA recently, after many years in NJ. The tax situation is radically different between the two.

I use John over at Zimmerman & Lorimer in Yardley PA. They're at (215) 493-5525. John knows NJ and PA taxes and is very familiar with rental scenarios and how they apply as to income and depreciation, etc. (I'm a landlord in PA also). Tell him Jeff K sent you.

Frankly - you should strongly consider staying in PA - though simply in a different area. If you move to NJ, you will pay NJ state tax (for you this will be either 5.525 or 6.37% depending on your income). If you stay in PA, you only pay 3.07 - except perhaps if your town has earned income tax.

NJ Property taxes are MUCH MUCH higher than what you are used to paying. For a comparable home, NJ property tax can often be TWICE (or more) what you pay now. Bear in mind that every $50/month is worth $10,000 on a mortgage loan.

In short - unless you HAVE TO move to NJ (vs. being on the border and still in PA), you should NOT move there. The people in the know like me are all leaving that state. LOTS of people live in great towns on the NJ border in PA - like Yardley, etc - and we can easily commute to wherever we need to in NJ without getting killed by their taxes.

Oh yeah and NJ just voted for yet another tax increase. You sure you want to go there? It WILL cost you! A LOT.

Oh - and the short answer to your first question is you will NOT pay capital gains on your current house - it's a primary residence that you occupied and lived in for over 2 years.

Realtor's aren't allowed to answer many of your questions due to various codes - so you'll just get a lot of "go talk to your lawyer, accountant, insurance company, etc".

I have done exactly what you are going to do, so here is my sage advice:

1. You probably have a mortgage on your current home based on 'owner occupancy". When the lender finds out that you are no longer going to use the property as your primary residence, they will ask you to refinance. In this case I would suggested doing a re-fi now to pull cash out, but get a loan that will let you "non -owner occupy" the property.

2. It is very important that you understand the short and long term costs and benefits of owning rental property. I found that although CPAs understand tax law, they may not understand the idea of income property from the owner's perspective.
a. Know what your future tax situation will look like when you actually have two properties.
b. Know what the tax consequences will be when you decide to sell one of them. IMHO I would never sell, I would conduct a 1031 tax deferred sale and maybe by a duplex or fourplex later after you had built up some equity.
c. You will have a different insurance policy, which should cost less, because you are just insuring the house and liability, not contents.

This is a long term investment which can pay off in the long term. Finding a great property management person or company is critical. Make sure they do quarterly interior inspections, you should plan on going back annually for a personal inspection (which will be tax deductible).

Questions 1, 2, 3 and 4 should be handeled by a mortgage Broker to give you actual numbers that will need to be considered. There are too many variables to be considered when answering these types of questions. Your appraised value, debt to value, income, credit, etc will all come into play for such an answer. A gerneral answer will not be beneficial to you. I have a person you can contact regarding those questions, his name is Ben Witmer from Price Financial, 610-964-1200 and he works on the weekends so give him a call tomorrow. Just tell him I sent you.

5. You can google any questions on google to get tons of answers. You will need to inform your mortgage company and insurance company once you decide to rent. You will also want your renters to obain Renters Insurance so it will protect their personal property in the event of a tragedy.


6. You will want to also consider property management if you are not able to act as the Landlord and faciliate tenant needs during the rental agrement, Sellers are renting out their properties when they are in need of moving to a new home but dont want to sell and cant get the price they need.

There are certain guidelines that you need to obey to use the rental income as state income. Just be aware that some renters will not keep the property as neat as you would like them to. You will more then likely have to make some repairs once the property is vacated. Make sure that you have their credit checked and references are checked into. You want to get feedback from previous tenants as to their payment history. Create a lease that covers damages, return of security and non or late payments. Keep all lienable items in your name as to avoid possible judgements on the property.

If you need any assistance with your rental please let me know as I am well versed in rental properties.

I am also a relocation specialist (originally from NJ) and can help you on that front as well. Just give me a call or shoot me an email of you have any additional questions, or you feel I have not answered you properly.

Stacey Karp, Realtor, ABR, e-Pro
CENTURY 21 Alliance - Royersford
322 N. Lewis Road
Royersford, PA 19468
610-948-2100 x311- business phone
610-948-2188 - fax
610-453-2488 - cell http://www.staceykarp.com
StaceyKarp@Century21.com
Licensed in PA License # RS302275

Sam,
You should be able to get a home equity loan as long as you qualify on your current home, banks are tending to restrict home equity loans to 80% total of the loan to value ratio, but that might give you enough to use as a down payment.
Consult an accountant on the tax implications. There are several good sites to list rental homes. Make sure you carry landlord insurance, it can be a little cheaper than your regular home insurance.
We rented and finding a good tenant can take time, you may want to run a criminal background check as well as asking for credit reports from any prospective tenant. As an agent I advise landlords to include a phrase that no illegal activities are to take place on the property in the lease and if they do they will give you the right to terminate the lease and evict the tenant. Get a lawyer to draft this for you. Good luck.