Hello all! I am looking to get some advice and guidance on a home that I own and currently rent out.
We purchased the home in 2018 and owe approximately $165K on the home with a 2.3% interest rate.
It is currently rented out for $2150/mo in a great neighborhood and area. We unfortunately were tagged to move out of state for my job so we opted to rent out the home in 2021. The house is in great condition with a new roof, new siding, and a lot of major upgrades in the house. We currently have no desire to move back into the home or the area it is in.
Recently, a major construction/shopping center project was approved in the area, leading to some drastic traffic impacts on the particular street the home is on. My property manager told me that there is a lot of concern about it impacting property values, as it’s going from a side street to the Main Street and bringing in a LOT of traffic.
The home is valued at around $320K and we are contemplating selling it. Once everything is paid, we would be looking at keeping roughly $100K-ish in profits.
Originally, our plan was to dump the house around our ten year mark (take advantage of military members being allowed to skip capital gains tax if occupied for 2/10 years versus the 2/5 years) and then doing a 1031 exchange to buy our final home, but a recent change in my career trajectory has us now putting off that final home purchase until 2031 vs 2028 as we planned.
I can always dump the money into a brokerage account since I’m fairly certain we would be exempt from capital gains tax and hold the money in there until we are ready to buy again.
That said, what do you think is the best way forward? We have had a decent experience as landlords, but our overall plan was to retire from the military (four years left) and have a paid off house (we also own a few other properties to accomplish this).
If you were in my shoes would you continue to hold the property and see what the market does with the major change (and losing out on property value) or hold until the 10 years of ownership mark and then sell?
Are there any other factors or things I’m not considering with selling a rental property?
Advice on selling primary residence turned into rental
byu/Outofcontrolpilot inrealestateinvesting
Posted by Outofcontrolpilot
6 Comments
What is the likelihood of the tenants staying? If they are good I’d atleast consider riding them out and self managing remotely. Assuming the place is in decent shape your involvement should be minimal untill they leave.
Alternatively have you looked into management fees. You mortgage on that purchase price at that rate should allow for plenty of cash flow even if you fork over a percentage to a management company.
You can’t do a 1031 for a rental to a primary anyway so head back to the drawing board.
if you bought in 2018.. when did you turn it into a rental?
That traffic concern would worry me too – once construction starts you’re looking at years of disruption before any potential upside from increased commercial activity, and by then who knows what rates will be for refinancing other deals.
Consider the tax implications on what youd get now vs what you think it will be worth after, act accordingly off this alone…other that youre thinking way too much re other plans…and I always am amused when someone says their last anything.
Don’t know about the military exchange but for 1031 you have to buy as a rental property for tax exemption. You would have to rent it out for 2 years before converting it to a primary home.