Nick Krautter walks through whether to sell your home or convert it to a rental when you move. He covers the $250,000 capital gains exclusion for single filers and $500,000 for married couples, the two-year timing rule to qualify, and whether you have enough equity to buy your next place without the sale proceeds.
Hey guys, Nick Krautter here. I want to talk to you about a factor that sometimes people really forget to take into account when they're deciding whether to buy or sell. And the big factor is, what do you really want to do with your life and where do you really want to live? I've got a couple great stories of how personal timing, or the timing for your family, matters way more than interest rates or market trends. And keep in mind, when you're buying and selling, I like to imagine that you're on a boat on a lake.. And if you're stepping from one boat to the other boat, whether the water level's high or the water level's low, you're basically trading across. Now, where that can get confusing is if you're moving from a market that's declining to a market that's improving, or vice versa, if you're moving from a market that has had a lot of appreciation to a market that's declining. Now, if you're moving in the same city, the chances are you're on the same water level in terms of the lake. In terms of that is a metaphor for the prices being higher, the prices being low. Now, another thing to take into account if you're moving and maybe the market's declining is, should I keep this home as a rental or should I sell it? And when I'm giving people advice on whether they should keep a property as a rental or whether they should sell it, there's a couple factors. If it's been your primary residence and you have appreciation, it usually is a better benefit to take the tax advantage of taking that capital gain, which you get an exemption of $250,000 for a single person or $500,000 for a married couple. And so if you have a gain and you've got it protected by that first-time or the homeowner exemption, a lot of times it makes more sense to take that gain because you only get to do it every 2 years. So if you keep that property as a rental and let's say you rent it out for 3 years, now you've lost that capital gain exemption and you're just locked in as a rental property. The other factor is, do you need the equity from that home to buy one where you're moving? And so keep in mind, if you've got a plan to move for life reasons, which is a really big positive reason to buy or sell, give us a call. Let us help you go through the process of, does it make more sense to keep this as a rental, find a good property manager, or does it make more sense to sell, take the equity, Take the tax advantage if it's your primary residence and put that money to work in your new town.
