Am I allowed to rent out a primary residence / homestead?

[zfa32937]

What is the name of your state (only U.S. law)? Houston, Texas

I will be relocating from Houston to Louisiana temporarily (6-18 months) to work on a Project in Louisiana for work. The company will pay me a weekly living allowance as long as I have a primary residence that is 50 miles away from the project location to cover the cost of renting a temporary apartment at the project location. I am currently renting an apartment in Houston but will lose that apartment once I move to Louisiana in July. In order to collect the weekly allowance I am considering purchasing a condo/apartment in Houston to act as my primary residence. I will use that address for my license, registration, bank accounts, etc. I will return to this purchased apartment/condo after my project is finished and work at our office in Houston while I wait to be assigned to a different project. I can also visit the apartment/condo once or twice a month while on the project in Louisiana since I will only be 2 hours drive away.

While working on the project in Louisiana, I want to rent the condo/apartment out to cover some of the cost of the mortgage. I would like to do this by either using airBnB, renting as a corporate rental, or renting it out to renters the usual way.

I am trying to understand if I am allowed to use it as my primary residence and rent it out at the same time. What options do I have for renting it out? Can I rent it out only short term or can I do long term rental as well? What would the tax ramifications be? Do I need to furnish it and store things there? If the tenant uses the address for his bank accounts and tax base would that effect my ability to use it as well?

Hope this provided you with some information to my situation and look forward to hearing from you guys!

Thanks!

 

[FlyingRon]

It's relatively straight forward.

First, you need to tell your lender what you intend to do. It's rather perfunctory but you do need their consent to lease.
Second, you should call your insurance agent and tell him what you intend to do. You need to make sure your interests and the banks are protected.

Texas landlord tenant rules are pretty weak. You can take a security deposit if you like and just thrown it into your regular bank account. You only need to give it back on moveout. At tax time you have to declare your rental income and from that you can subtract the appropriate portion of the mortgage interest, insurance, taxes, and depreciation deduction. If this ends up in a positive income, then you probably should have been making estimated tax paymetns as the year went by (though you are probably protected by the safe harbor provision the first year).

There are more issues when you sell. If you net a loss, chances are they are going to consider this a passive loss, which limits what you can deduct.

There's no issue with people having the same address on their correspondance/accounts.

When it comes to the Texas homestead tax emption, you just proportion it to the part of the house that is exclusively yours. You lose the exemption on the rental part, but you keep it on your part.

 

[zfa32937]

Thank you flyingron! This is a really good answer. A couple of questions though. I will be renting out the entire apartment/condo to someone. I will use it as my license and registration address and bank account address and tax base and all that. I completely intend to return to the property once I am done working on the project.

If I am renting out the entire property can I not claim it as my homestead even though I intend to return to it eventually? I will not be purchasing another home and will only rent a small 1bd apartment at the project location.

Also, I heard you may need belongings inside the property to prove intent to return. Does that mean I would need to rent it out furnished with my furniture or are the steps I am taking mentioned above (license, registration...) enough to prove I intend to return?

Thanks!

 

[FlyingRon]

You can claim the homestead tax exemption only on the property (and that portion of the property if it is also used for rental) that you are living in for the tax year in question.

Renting it out doesn't preclude being able to use the exemption in future years.

 

[LdiJ]

Thank you flyingron! This is a really good answer. A couple of questions though. I will be renting out the entire apartment/condo to someone. I will use it as my license and registration address and bank account address and tax base and all that. I completely intend to return to the property once I am done working on the project.

If I am renting out the entire property can I not claim it as my homestead even though I intend to return to it eventually? I will not be purchasing another home and will only rent a small 1bd apartment at the project location.

Also, I heard you may need belongings inside the property to prove intent to return. Does that mean I would need to rent it out furnished with my furniture or are the steps I am taking mentioned above (license, registration...) enough to prove I intend to return?

Thanks!

Once you rent out the entire condo it will no longer be your primary residence, because you will not be able to live or stay there at all. Therefore it cannot be claimed as your primary residence for tax purposes, and its unlikely that your employer would view it as your primary residence.

The other problem you would have is that your project could run anywhere from 6-18 months making it difficult for you to have a lease with someone, and you will have future projects of varying lengths afterwards.

What you could do is have a roommate, and maintain your own room, furniture and personal property at the condo, and actually stay there, as your primary home whenever you are in town, during holidays, and between projects.