Primary home or investment property?

Question

We are under contract with a new construction home in Central Florida which is still under construction. With the present market, by the time it's finished in a few months (mid 2022), we may have about $20k-$30k equity. We are currently in a rental which cost about the same monthly expenses as the house will when complete, plus $100k to furnish the new house.

Does it make sense to sell the new house (instead of using HELOC in case the market turns), stay in the rental & use the equity to invest in a BRRRR deal?

Tyler Gibson · Answer

I think selling would actually trigger income tax instead of short-term capital gain but you should ask a CPA!  I think you should live in it for at least 2 years then decide what to do. After 2 years you could sell and not pay capital gain or rent for 2 more years and sell without capital gain. The BRRRR strategy is very challenging in central Florida without having an off-market acquisition strategy that brings you deals with build in equity.

Jason Lagan · Answer

I wasn't considering short term capital gain tax. We may have to hold.

Bill B. · Answer

I assume in most markets it will cost you AT LEAST $20-$30k to sell. You might have paper equity. You certainly won’t walk away with enough to invest anywhere else. You probably wouldn’t be able to borrow enough with a heloc to make any real difference either. Unless you put 20% down you’ll be near zero from the heloc.

Either you move in to it and stop renting. You rent it out if you can turn a a profit from doing that. Or walk away. MAYBE the builder would give you a little of the extra they can sell it for, if they are almost out of supply.

Caleb Brown · Answer

Could you keep it as a STR rental then rent? Let the income build up as a DP and continue down that road. Let the equity build up and you could take a HELOC out

Primary home or investment property?

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