Rental Property Investor · Layton, UT · Member since 2014 · 28 posts · 11 votes
I am coming up on 2 years since I moved out of one of my rentals. It is located in the Salt Lake City area (Kaysville to be precise). I have approximately $200k equity after buying it in 2/2018 and moving out in 7/2020. I cash flow $600/month which is really good. Should I sell within the 3 years to bank the $200k equity? It's a VA Loan so other than the funding fee and $15k flooring improvements and around $15k for something else (bad memory) I have nothing else in the house. Should I sell this year, next year, or wait for 5-10 years and pay capital gains taxes.
Realtor · Minneapolis MN · Member since 2018 · 84 posts · 61 votes
4y
Tim, if you've lived in a property as your primary residence for 2 of the previous 5 years, you can sell it without paying capital gains tax, Hence 2/5.
Michael, whether or not you sell is totally dependent on what you'd do with the money. As I'm sure you're aware, the SLC market is brutal for buyers right now, with very limited inventory and swarms of buyers for every property on the market. If your plan is to sell to buy more property, you probably won't find something that cash flows as well as your Kaysville place does. Personally I'd keep the house. That's from a Realtor who would love to see more inventory! If you're expecting a lot of cap ex (roof, furnace etc) to come up in the next couple of years, maybe sell in the spring when the market will probably go psycho again. Maybe. No, don't. Keep it. If you need the funds do a re-fi.
Real Estate Broker · Omaha, NE · Member since 2020 · 329 posts · 203 votes
4y
My first thought is to refinance so long as you still cashflow after. (Assuming that this cashflow is after reserves) If not, I would set aside a reserve budget and then see what your actual cashflow is. Obviously you won't be able to get all of your equity out because you would have to do a different type of loan, but you should be able to pull out enough to purchase another property at least. The 2/5 rule is great and you should absolutely take advantage if it fits better with your investment goals. If you are looking to utilize that money and purchase a multifamily then now is the perfect time. I believe the 2/5 rule is significantly better than the 1031 exchange so if your goal is to upgrade then now is the best time.
Rental Property Investor · Lake Charles, LA · Member since 2017 · 48 posts · 38 votes
4y
I tend to agree with Tanner. Personally, I would prefer to keep the funds from that property coming in assuming the numbers will work for me once I do a cash out refi.
Tanner I'm not sure what 2/5 is. Could you explain?
Realtor · Minneapolis MN · Member since 2018 · 84 posts · 61 votes
4y
Tim, if you've lived in a property as your primary residence for 2 of the previous 5 years, you can sell it without paying capital gains tax, Hence 2/5.
Michael, whether or not you sell is totally dependent on what you'd do with the money. As I'm sure you're aware, the SLC market is brutal for buyers right now, with very limited inventory and swarms of buyers for every property on the market. If your plan is to sell to buy more property, you probably won't find something that cash flows as well as your Kaysville place does. Personally I'd keep the house. That's from a Realtor who would love to see more inventory! If you're expecting a lot of cap ex (roof, furnace etc) to come up in the next couple of years, maybe sell in the spring when the market will probably go psycho again. Maybe. No, don't. Keep it. If you need the funds do a re-fi.
Rental Property Investor · Layton, UT · Member since 2014 · 28 posts · 11 votes
4y
Thanks for the great replies. I know a couple of people who are waiting for the market to cool off and some waiting for it to come down. I dont think it comes down but it might cool off... in a couple years. No cap ex on this rental except maybe furnace as it's original from 2006. New appliances, water heat & softener, roof (hail from 2018 got me a new one for under $1200).