Rent or sell current home?

6 Replies

My wife and I are planning to buy another property to live in. Currently we are living in a 2bed 1 bath house 850sq ft home on a 10000 sq ft lot in a Good neighborhood in Rancho Cucamonga CA. The neighborhood is pleasant, except we have a next door home wherein 2-3 families are living in , the property is unkempt to say the least, usually someone is arguing and or fighting in the home, place reeks of marijuana and they have 3-4 dogs and 1 of the dogs they can't really control. Not sure if I'm being too overly cautious but I feel I can't in good conscience rent my home to another family knowing all I know with the nextdoor neighbor. Should I start from scratch and sell the house and buy a new property or keep and rent the house and buy a new property? Appreciate the feedback

Hello. One MAJOR advantage to renting the property out for a year is if you decide to sell it after renting it out for a year or longer it's considered an investment property and you can 1031 exchange it into a property of equal or higher value and not have to pay capital gains taxes on the sale of the property. 

BP has a lot of information on 1031 exchanges. 

Originally posted by @Karl B. :

Hello. One MAJOR advantage to renting the property out for a year is if you decide to sell it after renting it out for a year or longer it's considered an investment property and you can 1031 exchange it into a property of equal or higher value and not have to pay capital gains taxes on the sale of the property. 

BP has a lot of information on 1031 exchanges. 

I don't see how that can be considered an advantage. If you're going to look at it from a tax standpoint, the advantage is most likely greater if you sell.  As long as you've been living in your property as your primary for 2 years, then you won't be liable for any taxes associated with capital gains up to 500K (or half of that if unmarried). 

Originally posted by @Tony Kim :
Originally posted by @Karl B.:

Hello. One MAJOR advantage to renting the property out for a year is if you decide to sell it after renting it out for a year or longer it's considered an investment property and you can 1031 exchange it into a property of equal or higher value and not have to pay capital gains taxes on the sale of the property. 

BP has a lot of information on 1031 exchanges. 

I don't see how that can be considered an advantage. If you're going to look at it from a tax standpoint, the advantage is most likely greater if you sell.  As long as you've been living in your property as your primary for 2 years, then you won't be liable for any capital gains tax up to 500K (or half of that if unmarried). 

 Yeah? And? I don't know the numbers on the house of the OP but in my instance, I'm unmarried and if I sold the gains would be more than 250K so doing a 1031 is the only option for me. And as we all know I need my primary to be rented for a year and a day to be considered investment. So that would be considered an advantage.

Originally posted by @Karl B. :
Originally posted by @Tony Kim:
Originally posted by @Karl B.:

Hello. One MAJOR advantage to renting the property out for a year is if you decide to sell it after renting it out for a year or longer it's considered an investment property and you can 1031 exchange it into a property of equal or higher value and not have to pay capital gains taxes on the sale of the property. 

BP has a lot of information on 1031 exchanges. 

I don't see how that can be considered an advantage. If you're going to look at it from a tax standpoint, the advantage is most likely greater if you sell.  As long as you've been living in your property as your primary for 2 years, then you won't be liable for any capital gains tax up to 500K (or half of that if unmarried). 

 Yeah? And? I don't know the numbers on the house of the OP but in my instance, I'm unmarried and if I sold the gains would be more than 250K so doing a 1031 is the only option for me. And as we all know I need my primary to be rented for a year and a day to be considered investment. So that would be considered an advantage.

Exactly... you don't know the numbers on the OP's house. As such, it's quite amazing to me that you can make an assumption that his capital gains would be significantly north of 500K.  Maybe they are, maybe they aren't....which is why I stipulated that number in my original post. Because unless his gains are higher than 500K, converting it to a rental as a tax strategy is terrible advice.