The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: BiggerFishToFI on March 12, 2018, 11:05:11 AM
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My wife and I moved to another state for a temp job (medical residency) two years ago this May. We own a home in another state that we had been renting out with the intention of moving back. Now it is looking like a good chance we will want to stay in the new state due to job opportunities and that we actually like it here. So unless an awesome job opportunity comes up in the other state in the next few months we are looking to sell the house.
- Owned the house since 2011, was primary residence from 2011-May 2016. The property has appreciated ~120k to date. Since we last lived in it as a primary residence in May 2016 and rented it since then, under the 2 of 5 rule we have until May of 2019 to sell the house and avoid all equity gains tax. Is this correct? Does this apply to both state and federal taxes?
- The house is valued at 260k-280k but we are only able to rent it for $1450/month. It is cash flow positive to the tune of ~$400 a month including mortgage but not including long term major repairs. We have determined that this does not make it a good investment property. Agree?
- The person that lives next door to the house is a realtor but not a very experienced realtor (~2 years experience). We know and trust them to a reasonable extent. Does it make sense to hire them to sell the house or seek a more experienced realtor?
- Alternatives to using a standard realtor? Since we do not live in the state I'm not sure what other options there are like if we could sell it by owner and hire a fee-only person to show the house?
- The house needs some maintenance. Mostly it could use new paint, some basic landscaping work and new carpet in a couple of the bedrooms. Any advice or references on what work would provide the highest ROI on selling price? If we do sell we will have ~ a half years worth of rental income, would these improvements to sell the house work as a deduction against this income? Not sure how this works when combined with the 2 of 5 rule
- Any other general tips / resources for getting the most out of selling this property would be appreciated!! Thanks!
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2. Agree. Renting in another state is a headache and unless it pays well, its a waste.
3/4 Agent next door. No, unless you really trust them to do a good job. They will be selling to their future neighbors, so there is a conflict of interest. You could ask them if they have any clients that are looking to buy. Then they can represent the buyer and you represent yourself so you save on the fee.
5. Paint -> yes, but basic if you can do it yourself.
Landscaping -> yes, simple and try to do it yourself.
Carpet -> no, just make it look clean. It is a taste thing so buyers won't value it much.
The point is that the house should look clean and maintained. No need to look fancy.
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If redfin is in the area, consider it. They'll do a lower commission in the form of a credit back to you.
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Your interpretation of the last 2 of 5 rule is the same as mine. You have until May 2019 to sell. If you miss the May 2019 by one month, it's not an "all or nothing" tax liability, from what I understand. I think it's prorated.