We are about to sell our home to Opendoor but I am wondering if we should hold and rent it out. The math says we will lose $200-$400 a month. I am considering it as we have only been here a year and I would need to pay capital gains. Should I:
1. Hold and Rent waiting to sell in a year or two at our current 7% appreciation rate?
2. Sell and despite capital gains, sell and make a decent profit on a home we do not like?
3. Refinance at an appraised value $125k about the current owned amount? Rent and use funds to invest.
If this is your personal residence, or you have lived there in 2 of the last 5 years, you will not owe capital gains.
You've provided incomplete information regarding your question, but I would not keep a negative cash flow property hoping for higher sales proceeds at some point in the future. That's a high risk move to me.
@Michael Feeley Don't eat cash flow on a house you don't like. For most people, long term capital gains isn't that bad - but I don't know your personal situation or how much of a gain you are talking about. As @Dave G. said, if it is a personal residence (it sounds like it is) and you have lived there for 2 years you shouldn't owe taxes on the sale as long as the gain wasn't astronomical. Not sure of the reasoning for your sale - maybe you can stay for the remainder of the 2 years and sell then - and hopefully for your higher projected amount?
If it loses money on a monthly basis as is, definitely would not recommend refinancing into a higher balance because it will be a worse problem.
Why are you selling to Opendoor? I expect you should be able to get a significant premium in a short amount of time in most markets these days, though I do not know yours specifically.
@Hunter Vigneault I was wondering the same question about @Michael Feeley using Opendoor. I am not fully versed in how Opendoor works, but from what I know it sounds like the Carvana of real estate. People that use the service pay a big premium for convenience and time.
Thanks everyone. Opendoor's offer after all the fees works out to about the same net amount as if I sold my home on the open market for a price $16k higher than my Opendoor offer.
I will have to pay capital gains as I have only been in the home but with all the updates, I made to the home my taxes wont be too bad.