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Turning your primary residence into a rental question
Posted on 7/1/16 at 11:17 am
Posted on 7/1/16 at 11:17 am
I'm looking into doing this on purpose in the next year because I want to buy a new primary to better fit our situation with multiple kids now. I'll owe about 25% of the appraised value. I have 3 other rental properties currently and I'll probably have a 4th at that time so this would be my 5th.
The numbers are not going to be great, but I can get a 6-7% COC return and I know I can get great tenants most likely a military Captain or something along those lines. I just feel like with interest rates so low right now why should I sell a property I intimately know that probably will be very easy to manage?
My questions mainly correspond to if I have it almost paid off is it better to sell as a primary where there won't be a single capital gain and instead buy cheaper properties that will be paid off? One other reason I'd like to hold is because the appreciation of my current residence should be better than anything else I'd buy.
Thoughts?
The numbers are not going to be great, but I can get a 6-7% COC return and I know I can get great tenants most likely a military Captain or something along those lines. I just feel like with interest rates so low right now why should I sell a property I intimately know that probably will be very easy to manage?
My questions mainly correspond to if I have it almost paid off is it better to sell as a primary where there won't be a single capital gain and instead buy cheaper properties that will be paid off? One other reason I'd like to hold is because the appreciation of my current residence should be better than anything else I'd buy.
Thoughts?
3
Posted on 7/1/16 at 11:21 am to baldona
How much gain would there be if you sold now?
Posted on 7/1/16 at 11:25 am to baldona
If I understand your question, you want to know if you should sell this property and invest in smaller rental units with the proceeds, or hold this property as a rental and sell it down the road?
I guess it depends on the amount of gain you would have that would be taxed.
Also, you can rent this property out for the next three years and then sell it under the principal residence exclusion. To qualify as a principal residence, it has to be your principal residence for 2 of the previous 5 years. So you might want to rent it for three years and then sell it- as you would have three years of rental income, more home paid off, and still not be taxed on the gain.
I guess it depends on the amount of gain you would have that would be taxed.
Also, you can rent this property out for the next three years and then sell it under the principal residence exclusion. To qualify as a principal residence, it has to be your principal residence for 2 of the previous 5 years. So you might want to rent it for three years and then sell it- as you would have three years of rental income, more home paid off, and still not be taxed on the gain.
Posted on 7/1/16 at 11:25 am to baldona
Just FYI if you decide to keep the rental and the purchase of your new primary is going to be your 5th current mortgage (or more) I think there is a requirement on putting at least like 25% down.
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