I own a home in Santa Fe, NM. I have been renting it out for the past 5 yrs but the rent doesn't cover all costs ($150mo). Thinking of selling...

Asked by jabez0721, Glenview, IL Mon Jun 17, 2013

We had a market assessment done and we stand to make about $100k over what we currently owe. What factors should be considered in making the decision to sell vs continuing to be landlords? (We have thought of, capital gains tax, responsibility of being a landlord)

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Steve Rizika’s answer
Steve Rizika, Agent, Santa Fe, NM
Mon Jun 17, 2013
Great question and I am sure you will receive many answers. You can put off the capital gains tax by doing a 1031 exchange. This loophole allows you to replace the sold property with another like-kind property, while deferring the tax liability. You could replace your current rental with another or one closer to home for ease of management. You must work with a knowledgeable Realtor who has good experience in 1031 exchanges.

If you want out of the landlord game you should quantify the variables. One thing to figure out is your basis in the property. Improvements you have done, some operating costs, and sales costs can be used to increase your basis in the property thus lowering your capital gains liability. You should talk with your accountant because you may owe considerably less in capital gains than you think.

Another question to consider is what you would do with the proceeds of the sale. Take a trip, put into the stock market, pay off some debt?? Best to make a plan that best suits your needs.

Always available to help!

Steve Rizika
Associate Broker
Santa Fe Properties, Inc
(505) 577-8240
0 votes
Thank you for your reply. We currently live in Santa Fe in the South Capitol area and also own a home in Taos, which we also rent out long term. If we were to sell we would primarily use the money to pay off our two auto loans (highest interest loans we have) and a credit card, then redirect the $$ we had been using for those payments to pay off a 2nd mortgage on our current home. The Taos property is free and clear and all that income is going to back into that house. Thanks for the info on the capital gains, we will talk with our accountant.
Flag Mon Jun 17, 2013
Valerie Hass…, , Santa Fe, NM
Mon Jun 17, 2013
The question is a good one and there are many factors involved. You may wish to do a rent analysis as well to see whether the current rental rates are accurate. You also want to assess what your ultimate goal is in owning investment property. There are many factors involved. The $1800 per year ads up to 9k of a loss overall - however, depending on what you paid...you may find you gained plenty by holding it. The markets are reviving and we are finally seeing mild appreciation...so you may be wise to hold onto it to see a greater overall increase in your net gain. The goal of income property is ultimately to hold it, pay it off and have an income for life...but that is determined by many factors. As an investor - you may be interested in saving as much money as possible if you sell...so be sure to consider http://www.hardyandcompany.com as an alternative to traditional services. Be sure to look into 1031 exchange options as well. If you ultimately want to end up in Santa Fe to retire...and you love the property...you may want to hold on to it. Call if you need help with finding great tenants or want to analyze the rents.
0 votes
Please feel free to contact me for an honest assessment on the rental position of the property. Remember that "losing money" on a rental is a relative term since you get to write off the loss in the end - possibly affecting your overall tax consequence in the positive. I do not sell, but will be honest with you if it appears to be a wise course. Your post says Illinois...but, it appears you may be local and it is easy for me to meet up with you to determine if anything can be done to offset the negative. 505.990.2133
Flag Mon Jun 17, 2013
Thank you for your reply. The $1,800 annual loss is glaring at us and causing us to ask... is it worth it? We own/live in a beautiful home in a great neighborhood in Santa Fe and also have rental property in Taos. This is the only one we are losing money on as a rental.
Flag Mon Jun 17, 2013
Ricky Allen, Agent, Santa Fe, NM
Sat Sep 7, 2013
Obviously, you need to get some advice from your tax professional.
Feel free to contact me to discuss your real estate options in todays market.

Ricky Allen
0 votes
Beverly Chap…, Agent, Santa Fe, NM
Mon Jun 17, 2013
I would also speak to your tax accountant and see what your taxes might be! Sometimes, they aren't as bad as you think! Do you live in Santa Fe now? Or, do you travel to take care of this home? I'm happy to go and look at it for you, get a new assessment done, and give you a net out sheet that will give you the bottom line of your expenses, if this would help. Aaron is right about the other costs that could be involved also!

Happy to help if you need me! Beverly Chapman, Chapman Realty
0 votes
Aaron Borrego, Agent, Santa Fe, NM
Mon Jun 17, 2013
Closing costs with the title company, commissions if you're using a Realtor, pro-rated property taxes, and any repairs requested by the buyer are a few others to keep in mind.
0 votes
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