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We have our primary house in Denver and dont plan on living there any longer in about a year.
It will sell for maybe a little more than 400K and we bought it for less than 100K a long time ago (also paid off long time ago).
If I sell the house, I understand I would not pay any tax on the gain. House has never been rented out by us in the time we have owned it.
However, I dont have any plans for the money for a few years (yes, we are already fairly well diversified) but the money would eventually go back into real estate.
What little I know about inflation is that real estate rental is a reasonable hedge. So if it appears that inflation will become more of an issue in the next few years, I believe a good option would be to just keep the house and rent it out. The whole idea behind this would be betting on inflation.
But if I rented the place out, would I lose that the big tax benifit from it being my primary residence.
Is this about right.. I should not consider renting because I would lose the tax break?
We have our primary house in Denver and dont plan on living there any longer in about a year.
It will sell for maybe a little more than 400K and we bought it for less than 100K a long time ago (also paid off long time ago).
If I sell the house, I understand I would not pay any tax on the gain. House has never been rented out by us in the time we have owned it.
However, I dont have any plans for the money for a few years (yes, we are already fairly well diversified) but the money would eventually go back into real estate.
What little I know about inflation is that real estate rental is a reasonable hedge. So if it appears that inflation will become more of an issue in the next few years, I believe a good option would be to just keep the house and rent it out. The whole idea behind this would be betting on inflation.
But if I rented the place out, would I lose that the big tax benifit from it being my primary residence.
Is this about right.. I should not consider renting because I would lose the tax break?
if you let it go to long as a rental you start to lose the tax exclusion when you sell .
The question somewhat involves being diversified in case we run into a period of inflation. It is not about wanting to be a landlord at all.
We have been landlords in the past on a different rental house. I was OK with it, my wife on the other hand is "not real good" at being a landlord. As mentioned, this is all about a hedge on inflation.
But I dont at all want to do something dumb and lose the tax benny on selling our primary home.
I understand the capital gains exclusion is $250K (single) or $500K (married) so you appear to be GTG if you sell it now.
It's not clear to me what will happen if you convert it to a commercial property but I suspect your CG exclusion could be affected. Consult a tax advisor.
I agree with MrRational, sell it, buy multiple properties and very importantly, near you, so you can do small repair jobs yourself. (This is if you really want to be a landlord.) BTW if you go this route, consider a multiple unit property. And be reminded, if you have multiple units or a MU property then one tenant moving out won't hurt you as much.
It appears the housing market is up in desirable locations, and likely to continue up. But... there is no guarantee there won't be another housing crash. At least they aren't handing out mortgages like party favors as they used to, but damned near too close IMO.
I suggest you select another investment vehicle you expect to rise faster than housing prices and put your proceeds in that or them. (Diversify.) When you buy your next property you'll set a new floor for your CG exclusion, and pay less or no CG when you sell the next house.
And just sayin', I just hate being a landlord. I've already sold 3 of my 4 houses, and my last tenant is moving out at the end of next month. I'll be glad to never be a landlord ever again, and I'm looking forward to a nice profit when I cash this property out around January.
it has to be your primary over 2 of a rolling 5 year period .
So. since I have been in this house for a long time, we could rent it for up to three years then sell or move back in and sell and get the married tax break on the full amount.
Yep.. I do not at all look forward to the multiple hassles of renting and would not live that close to the house. The money would be in our kitty for buying the next house after a few years and I would hate to see its buying value eroded by being in the wrong place.
Thanks, I will confirm the above... and we have another year to watch what happens..
as long as it was your primary day 1 and not a 2nd home converted to a primary , you could live in it 2 years and rent it 3 however it must be gone by the end of that 3rd year or you blew it.
The cap gains exemption on a personal residence is a huge perk. Personally, I wouldn't risk losing it by sitting on the house.
It sounds like you are planning to move, so I'll point out the obvious... home prices do not move in unison across the country. Denver house prices could move one direction while prices move in the opposite direction where you are planning to move. You might gain or you might lose... hard to guess.
The cap gains exemption on a personal residence is a huge perk. Personally, I wouldn't risk losing it by sitting on the house.
Exactly my thoughts. My previous house sold for mere dollars below my 250K and that was a fantastic boon!
In fact I'm watching house values in my new neighborhood and thinking ahead to the day my value reaches an increase of 250K and at that point I'll review my options considering possibly leaving California. I just think of that huge, beautiful hunk of cash (no mortgage) as I drive across the state line.
If I were the OP I'd sell it and find some good investment to park the money.
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