First post here and I have a question about either selling or renting my current house. I am moving to a new area where I will be renting an apartment for at least the first year. I have lived in my house for only one year now. I am wondering tax-wise would it be better to try and sell my current house and just get away from it altogether or would renting be beneficial? I bought my house for $215,000 and currently owe $210,000. Any help or advice at all will be greatly appreciated!
Oh and I guess I should add that my current total monthly expense for the house is $1455 including payment and escrow account. There are no HOA fees. And comparable houses are currently renting for $2,200 to $2,500 a month. Insane I know but that's how the market is here.
Well it obviously depends on if you need the money or not. If you do not want to pay taxes when you sell, then you must live in the home for two years before you can sell tax free. You have five years after the two years you live in it to sell before you get taxed. If you choose to move out and rent it, you could always do a 1031 exchange when you do sell and put the money into another real estate property to defer taxes. If you don't need the money, I would rent it out. Unless you've gotten a ton of appreciation. That is the missing factor.
Thanks Tyson Cross. There definitely hasn't been any appreciation since I bought last year. Maybe a few thousand but not enough to make a big difference. I'm not sure I understand what you meant by "If you don't need the money, I would rent it out." Wouldn't renting it out increase my cash flow and result in a profit? Are you just saying that because the return will happen at a slower rate as opposed to selling it?
It sounds like you may be a candidate for an exemption on the 2 yr period for application of the primary residence gain exclusion sec 121 IRC. If your move is job related you may be able to sell that house and pro-rate the gain that you can take tax free. My guess is that you would be able to sell and not incur any tax on gain from the sale. Check with your CPA
In any case as you stated there is not much of appreciation there and that may not even cover your cost of paying an agent to sell your house plus seller's closing costs. Seems you would cash flow nicely now too . I would suggest you keep it, might even provide enough for your rent at your next location and cover your loan payments as well. Nothing like owning a house someone else will pay for you. Should help you save more money every month from your employment as well. I would leave well enough alone.
With that little amount of equity, I would rent it out. Plus, it looks like you would cash flow nicely. You could accelerate the payoff with that extra cash and could have the house paid off a lot quicker. Then when you own it free and clear you can do it again and again and again. Don't forget to put some $ away for repairs and expenses.
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