Updated about 2 months ago on . Most recent reply
Sell or Rent?!
My husband and I would love some help/guidance. We purchased our home in McKinney, Texas (Frisco ISD) in 2022 for 350k (3.6% interest rate on mortgage). We are building a house in Missouri to move closer to family. Our total monthly payment in TX is $2300 and we could rent it for $2,200-2,350. With moving we would lose our homestead exemption and so our monthly payment would go up to $2450. If we sold we could get roughly $390,000. We are okay with playing the long appreciation game but feel that McKinney/Frisco area will see a slow down in appreciation compared to previous years. We are wondering if it was you, would you take that money and invest it into another rental that makes more financial sense or keep the house for 15 years for appreciation? Thank you so much in advance for helping!
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- Qualified Intermediary for 1031 Exchanges
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@Amanda Polton, there's no right or wrong answer, but there are a few things that could give you some room to breathe while you decide what direction you want to take.
If you can tolerate the time it takes to meet the primary residence exclusion and have lived in the property for at least two out of the previous five years you've owned it, that would allow you to take the first $250k ($500k since you're married) tax-free when you sell. In my opinion, this is the greatest gift the IRS has ever given homeowners. And it would allow you to take $500K of profit tax-free and have access to 100% of the equity in the property, like @JD Martin is suggesting.
If you decide to rent out the property, then sell later in the future, you could still do a 1031 exchange since you would be converting the property to investment, and that would allow you to defer all of the tax and depreciation recapture and reinvest it into another investment property/properties of the same or greater value. This is another tool that allows investors to scale quickly and invest in larger real estate.
You don't have to make a decision right now. Test the waters and see if that would be a good rental before discarding it. Knowing you have some really good options
- Dave Foster
