Thinking of subletting my co-op...

not enough information. First are you allowed to sublet, if so how long. Do you have a plan for how long it will be an investment property?

Tax wise, if you say rent it out for over 5 years you will lose your $250k single or $500k married gains exclusion on your primary residence, assuming you have a gain.

There are other considerations regarding depreciation of the apartment when it is an investment property and how that will effect your taxes when you sell, etc.

As to the rest of pros and cons, it depends whether you are actually making money renting it out. If you are just breaking even cash wise, I do not see why you would want to, unless you can not sell for some reason. If you are actually turning a cash profit and you do not mind being a landlord, then not a bad investment, if you want to assume for now that the property will also appreciate in value over time.

You will have to pay some sort of sublet fee to the building. Some buildings charge a one-time fee per lease; others take a cut of the rent. Also, most boards will only allow one-year leases (which can be renewed at the board's discretion) and most co-ops will only permit shareholders to sublet for a finite amount of time--often two or three years out of every five.

Keep in mind that your prospective tenant will have to pass a co-op board interview. Many renters don't want that hassle and will bypass co-op rentals. That, coupled with the 'hard out' required by sublet bylaws will narrow your pool of potential renters significantly as many people won't want to be forced to move in two or three years.

As for being a landlord, a lot depends on your tenant. I had a very good tenant for my co-op sublet--they paid on time, didn't cause problems and left the place relatively intact. But it's a crap shoot--you never really know what you're going to get. Personally, I plan to try to sublet again as soon as my required break is up next summer. But it works well for me as I have no mortgage so the taxed earnings are profitable. Otherwise I'd seriously consider selling (which may happen sometime down the road).

If you will be out of town or the country for a year or two, go ahead and sub-let if co-op allows. Ours charges a monthly fee and permits renting for 2 yrs max at a time. If you are renting to make a profit, a co-op is not typically the best platform. If you are renting because you can't sell and think prices will improve later, unless you have a fairly long time horizon, sell now and move on with your life.

Thanks all. Here are the details.

Furnished studio. No mortgage. Sublet policy is 2 out of 5 years. Looking to sublet for one year. Would be fine with breaking even if that is more advantageous tax wise. $800 covers maintenance, sublet fee, insurance. The market rate in the building is around $1,800. I would probably only sublet to someone I know or who was recommended by someone I trust.

Furnished apartment changes the market you are looking at also, as well as only 1 year. You are then looking for a very specific individual.

If you are not looking at selling or are coming back to the apartment, no reason not to make some money in the interim.

is there insurance you should get for subletting your co-op?

landlord insurance. Although you may be covered under whatever insurance you may have now. In addition always make whomever rents your apartment get renters insurance for their stuff.

in short, tax wise you will generally do better not breaking even, but actually making money that you have to report as taxable income. this is because even if you have income on which you have to pay additional taxes (say at a 30% rate), you will still have 70 cents on each additional dollar over that breakeven point to put in your pocket.

the general tax implications are as follows: You will need to report rental income on your unit, but then you can use the related expenses to offset that income. You can also depreciate the unit and the furniture, which would act as additional expenses to offset the income. The basis on which you could depreciate these items is generally the fair value at the time you start using the property for rental purposes. I believe the unit would be depreciated over 39 years and the furniture would generally be over 7 years. When you sell your unit, however, keep in mind that any depreciation you took on it will reduce your basis in the unit, and your gain on sale will be higher (which, if you go back to living in the unit for a certain period of time, you can probably again qualify for the 250k exclusion.

so basically, looking at your situation, if you charged 1800/month in rent, had expenses of 800/month, and depreciation expense of 900/month (assuming studio's FV is 400k, divided by a 39 year life, is about 850 depreciation/month plus furniture depreciation of roughly 50/month), you really only have to report 1200 of actual income (100/month) that will be taxed on your tax return.

if your expenses exceed your rental income, you can actually take a loss of up to 25k, depending on what your income is (this phases out...once you make over 150k you can no longer take rental losses, you must carry them forward until you have income to offset them).

DK09 thansk fro info very informative!