Potential First Rental

4 Replies

Hello Everyone,

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. 1. Hold and Rent waiting to sell in a year or two at our current 7% appreciation rate?
  2. 2. Sell and despite capital gains, sell and make a decent profit on a home we do not like?
  3. 3. Refinance at an appraised value $125k about the current owned amount? Rent and use funds to invest.

Thank you so much for your assistance.

Mike

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.

Best,

Hunter

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.