Mortgage Corp
If the rent I’m collecting doesn’t meet my expenses (mortgage), what do I do?
I want to rent out my current home when I move in a few months. I know that I won’t be able to get the rent I need to cover the mortgage, taxes and insurance. What do I do? Should I form an S-corp so I can deduct the losses?
Previous comments were correct in that you do not need to form an S corp to deduct rental expenses. You do that on a Schedule E in your 1040 return. The gross rents less the gross expenses is either income or loss depending on the result of the computations. This may benefit you tax-wise but it will not help your monthly cash flow in supporting the debt versus the income.
If you cannot rent the property for a sufficient amount to cover the monthly debt I cannot see the benefit in retaining the property.
A previous responder also suggested the option of an interest only mortgage. This is an excellent option if the interest only payment allows the property to cash flow for you because you will be able to realize the tax benefit as well and is a option I would investigate in order to make an informed decision.
Finally, have you fully considered the responsibilities of a landlord? There is a lot more there than just collecting the rent. Are you prepared to deal with non-paying renters? You should have a reserve fund set aside to cover the expenses of mortgage payments and possible litigation should you have to evict. What about the possiblity of damage to the property? Are you a handyman type or are you going to have to hire someone to do necessary repairs? And, finally, heaven forbid, what if you end up with a tenant who looked like gold but turns your house into a meth lab? The abatement costs for that type of situation are horrendous.
I’m not saying any of this will happen but you should think about the worst things that could happen and be prepared to deal with them if they do.
Good luck