Repairs to a house in order to rent it that were paid by the beneficiary, but is still owned by a Trust
"The Trustee has allowed me to act as his ""agent"", continuing to pay   bills, and take care of much of the administrative affairs for my   mother's estate since I did all of it for years before she passed   away. I was not paid for any of this work. ... The expenses were more than $30K last year, and there is still a punch list to go this year. The trust should reimburse your expenses and deduct them on the trust tax return. Since the Trust owned the property in 2015, and I will receive ownership this month, can last year's expenses incurred for the Trust be deducted again future income for my property this year?  Not exactly. The trust will file its own tax return and will report the income/loss attributed to the beneficiaries per the trust rules. What is attributed to you will flow to your Schedule E. From there you own it and if it is a passive activity where the loss is limited - you can carry it forward and offset with future gain. The trustee will have to deal with all the paperwork. Do 1099-misc forms need to be filed for the contractors who worked to get it ready for rental? It is my understanding that since 2010 (and before 2010) landlords who are not in real-estate trade or business are not required to send out 1099. But it won't hurt if you do, also. In any case - for all of these issues you should talk to a tax adviser (EA/CPA licensed in your State)."
It sounds like you plan to sell sooner or later. If your opinion is that there is still room for the housing market to grow, make your bet and sell later. The real estate market is much less liquid than other markets you might be invested in, so if you do end up seeing trouble (another housing crash) you may be stuck with your investment for longer than you hoped. I see more risk renting the house out, but I don't see significantly more reward. If you are comfortable with the risk, by all means proceed with your plan to rent.  My opinion is contrary to many others here who think real estate investments are more desirable because the returns are less abstract (you can collect the rent directly from your tenants) but all investments are fraught with their own risks. If you like putting in a little sweat equity (doing your own repairs when things break at your rental) renting may be a good match for you. I prefer investments that don't require as much attention, and index funds certainly fit that bill for me. "A home is an investment, but the value it returns isn't primarily financial ($$) - they are consumption (a place to live). This gives it different characteristics than other investments (e.g. increasing the amount invested by buying a more expensive home doesn't do much to assist your financial well-being and future income, and isn't necessarily the ""responsible"" thing to do). You may get some capital gains, typically in line with inflation, sometimes less, sometimes more, but those aren't the most reliable, and it's difficult to realize them (it involves selling your house and moving). Its main value as a hedge is a hedge against rising rent. But if you're still working full-time and can expect cost-of-living increases, that hedge may not be as valuable to you as it would to, say, someone living on a fixed income. But as for treating it as a ""low-risk investment""? That's very problematic. Real low-risk investments are things like government bonds, where you can't lose principal. Unless you're going to live into your house until the day you die, the real estate crash should have disabused you of any notion that housing values never go down. Rather, your house is a single, indivisible, undiversified, illiquid investment. Imagine, if you will, going to your brokerage and borrowing a hundred thousand dollars or more on margin to invest in a single real estate investment trust... then take away whatever diversification the trust offered by holding multiple properties. Also, you can't sell any of it until you move away, and the transaction fee will take something like 3%. Still sound ""safe""? Moreover, it's exactly the wrong kind of risk. Your house's value is tied to what people are willing to pay for housing where your house is, which is usually subject to the whims of the local economy. This means that in a recession and housing bust in the local economy, you can lose your job and have your mortgage go underwater at the same time. It totally makes sense to treat your house as an investment to some extent, and it makes double sense for a financial adviser to consider it as part of your investment recommendations. ""Safety"" is not the way you should be thinking of it, though." "This can be done, and there have been many good suggestions on things to do and watch out for.  But to my shock I don't see anyone offering any words of caution about property managers! Whatever you do, don't assume they have your best interests at heart.  Do not assume that ""no news is good news"" and that if you aren't hearing of problems and are just collecting rent checks, everything must be fine. You can easily end up with tenants you would never have allowed yourself, or tenants with pets that you would not have allowed, etc.  Especially if the manager doesn't want you to have a vacancy and potentially lose you as a client, they may very well lower their standards just to get the place occupied.  And a year or two or three later, you may find yourself looking at a very large repair bill and wonder how on earth it could have happened when you supposedly had someone looking out for your property! There are quality, ethical property managers out there.  They are not all bad to be certain.  But whatever you do, check up on them.  And with multiple properties - especially if in multiple areas/states etc. - this can be nearly a full time job in itself.  As the saying goes, ""Trust, but verify"".  I have never found this to apply more than with rental properties and property management. Don't leave anything significant to them 100%.  You can't even assume that a rule like ""all expenses over $50 must be cleared by me first"", as that can simply mean that they don't bother to come to you for certain kinds of repairs that would cost more than that, or that they just get them ""taken care of"" by their own person (done poorly, illegally, etc.) and never tell you.  Never trust their choice of tenants blindly.  Visit the place yourself at least every few months - a quick driveby at a minimum or better if you can, arrange a reason to walk through the house personally.  Check the back yard, never assume that the front yard is indicative of anything else.  Never assume that a ""no pets"" rule will be followed, or that tenants wouldn't lie to the management about having pets.  Never assume that the tenants won't move additional people into the property as well. Always expect a bare minimum of 1 month vacancy every year, and an additional minimum of 1 month's rental revenue in unexpected maintenance/repairs every year.  This is at a minimum!  You might do much better than this, and have a high quality tenant in place for years who costs next to nothing in extra maintenance.  But do not count on it. Rental real estate investing looks so simple on paper, where it's just numbers.  But reality has a very rude habit of surprising you when you least expect it. After all, no one expects the Spanish Inquisition! Good luck!" "I don't know much about New Zealand, but here are just some general thoughts on things to consider. The big difference between buying a house and investing in stocks or the like is that it is fairly easy to invest in a diversified array of stocks (via a mutual fund), but if you buy a house, you are investing in a single piece of property, so everything depends on what happens with that specific property.  This in itself is a reason many people don't invest in real estate.  Shares of a given company or mutual fund are fungible: if you buy into a mutual fund, you know you're getting the same thing everyone else in the fund is getting.  But every piece of real estate is unique, so figuring out how much a property is worth is less of an exact science.  Also, buying real estate means you have to maintain it and manage it (or pay someone else to do so).  It's a lot more work to accurately assess the income potential of a property, and then maintain and manage the property over years, than it is to just buy some stocks and hold them.   Another difficulty is, if and when you do decide to sell the property, doing so again involves work.  With stocks you can pretty much sell them whenever you want (although you may take a loss).  With a house you have to find someone willing to buy it, which can take time. So a big factor to consider is the amount of effort you're prepared to put into your investment.  You mention that your parents could manage the property for you, but presumably you will still have to pay for maintenance and do some managing work yourself (at least discussing things with them and making decisions).  Also, if you own the property for a long time your parents will eventually become too old to take care of it, at which point you'll have to rethink the management aspect. So that's sort of the psychological side of things.  As for the financial, you don't mention selling the house at any point.  If you never sell it, the only gain you get from it is the rent it brings in.  So the main factor to consider when deciding whether to buy it as a rental is how much you can rent it for.  This is going to be largely determined by where it is located. So from the perspective of making an investment the big question --- which you don't address in the info you provided --- is: how much can you rent this house for, and how much will you be able to rent it for in the future?  There is no way to know this for sure, and the only way to get even a rough sense of it is to talk with someone who knows the local real estate market well (e.g., a broker, appraiser, or landlord).  If the property is in an ""up-and-coming"" area (i.e., more people are going to move there in the future), rents could skyrocket; if it's in a backwater, rents could remain stagnant indefinitely. Basically, if you're going to buy a piece of real estate as a long-term investment, you need to know a lot about that property in order to make any kind of comparison with another investment vehicle like a mutual fund.  If you already live in the area you may know some things already (like how much you might be able to rent it for).  Even so, though, you should try to get some advice from trustworthy people who know the local real estate situation." Generally speaking, yes, you're obliged to pay rent for the remainder of the lease term. But the landlord is obliged to mitigate damages, so if you can find a suitable tenant the landlord has to let you out of the lease. Can I give the bank the $300,000 to clear the mortgage, or must I pay off the total interest that was agreed upon for the 30 year term? This depends on the loan agreement.  I had one loan where I was on the hook regardless.  Early payment was just that, early payment.  It would have allowed me to skip months without making payments (because I had already made them).   Most loans charge interest on the remaining balance. If you pay early, it reduces your balance, decreasing the interest.  If you pay it off early, there's no more balance and no more interest.   I'm curious why the bank would let you do this, since they will lose out on a lot of profit. But they have their money back and can loan it out again.  If they maintained the loan, they aren't guaranteed of getting their money.   Interest is rent that you pay for the loan of the money.  Once you return the money, why pay more rent?  While some apartment leases require paying through the entire term, most allow for early termination with proper notice.  You give back the apartment; the landlord rents it out again.  Why should they get paid two rents?   Another issue is that if someone with a mortgage switches jobs to a new location, that person will likely prefer to sell the current house and buy one in the new location.  This is actually the typical way for a mortgage to end.  If the bank did not allow that, they would essentially force the family to rent out the mortgaged house and rent a new house.  So the bank would go from an owner-occupied house that the inhabitants want to keep maintained to a rental, where the inhabitants only care to the extent of their legal liability.   Consider the possibility that the homeowners lose one of their jobs.  They can't afford the house.  So they sell it and close out the mortgage.  Should the bank refuse to allow the sale and attempt to recover the interest from the impoverished homeowners?  That situation would almost guarantee an expensive foreclosure.   Once there is any early termination clause for any reason, it makes sense for the bank to structure the loan to include the possibility.  That way they don't have to investigate whatever excuse is involved.  Loan regulators may require this as well, particularly on mortgages. You seem to think that the term “held”is used correctly. There lies your logical fallacy.   I made no such assumption. In my question I test both the use of the term “US economy” AND the term “held”.   It is obvious you can’t “hold” income but if you want to get down to technicalities, both asset and income/expenses are types of accounts while the notion of “trust” is a legal construct to limit the rights of external creditors. "Three companies may have copies of it: the bank, the Title Company (aka settlement company), and perhaps the real estate agent. The bank (assuming you had a mortgage) is usually the easiest one to contact, as you're probably still making payments to them. They may have sent you the form in a large packet when you sold the house and paid off the old mortgage. There is a tradition of sending customers their entire mortgage file once they pay off the mortgage after 30 years - which is very rare nowadays but many banks still adhere to it because the mortgage business is built on momentum and very slow to change. Otherwise, the title company should have a copy of it. If you don't know which company was used, they should be named as Trustee on the Deed Of Trust (which in most states is the official name of the document that we call a ""mortgage""). The county recorder's office will have a copy of that Deed Of Trust on record if you can't find it anywhere. Some counties have digitized these so you could find it online, but some would require you to request a copy and pay a small printing fee for it."