Author Topic: Rent vs Sell  (Read 2049 times)

FastStache

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Rent vs Sell
« on: April 15, 2014, 01:45:40 PM »
I have lived in my house for over 5 years. After 9% in fees I should net about 30K with no capital gains.

If I decide to rent it out and sell it in the future, I would be subject to capital gains right? Is there a way around it if I put the money into another house?

arebelspy

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Re: Rent vs Sell
« Reply #1 on: April 15, 2014, 02:03:05 PM »
I have lived in my house for over 5 years. After 9% in fees I should net about 30K with no capital gains.

If I decide to rent it out and sell it in the future, I would be subject to capital gains right? Is there a way around it if I put the money into another house?

1031 exchange.
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FastStache

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Re: Rent vs Sell
« Reply #2 on: April 15, 2014, 02:30:06 PM »
If i bought the house as an individual, but rent out the house under an LLC does this pose a problem for the getting the money out?

If you have a good resource to read up on it, I'd appreciate it! Thanks for the help already.

arebelspy

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Re: Rent vs Sell
« Reply #3 on: April 15, 2014, 02:31:37 PM »
If i bought the house as an individual, but rent out the house under an LLC does this pose a problem for the getting the money out?

Under what authority would the LLC rent it out?

If you have a good resource to read up on it, I'd appreciate it! Thanks for the help already.

Read up on what?  1031 exchanges?
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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DoubleDown

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Re: Rent vs Sell
« Reply #4 on: April 15, 2014, 02:44:36 PM »
Also, note that you are only taxed on gains if you just sell and do not do a 1031 exchange buying another property. At the macro level, this means (Current Sale Price) - (Original Purchase Price + Transaction Costs). You mentioned you expect to net about $30k, but if that is simply getting back equity you put in (such as on a down payment), you will not be taxed at all. Also, any improvements on the property can be added to your cost basis. It's very possible you will have zero taxes on the sale, depending on how much equity you put into the house vs. appreciation on the property. Finally, even if there are some taxable gains, they would be classified as long term gains that are taxed at a lower rate than income.

tryan

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Re: Rent vs Sell
« Reply #5 on: April 15, 2014, 02:51:25 PM »
Quote

If I decide to rent it out and sell it in the future, I would be subject to capital gains right? Is there a way around it


Used to be if you lived in the house 2 of the last 5 years you could sell tax FREE ... now the laws have changed to prorate the tax based on the % of time you lived there.  So if you lived in the house 5 and rented 5 then 50% of the gain is tax free. 

FastStache

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Re: Rent vs Sell
« Reply #6 on: April 19, 2014, 11:05:43 AM »
Analysis
Purchase Price - 200,000
Refinanced in 2013
Current Mortgage - $184,700
Estimated Sale Price - 235,000

Estimated Rent - 1700

Expenses
Principal and Interest - 860 - about 300 goes to principal
Current Taxes w/Homestead - $3,800, estimate $4500 with no homestead
Insurance - 1200
PMI - 94.09
HOA - 75
Lawn Care - 45 (would pass on to renter, told is the norm)

Yearly Rental Analysis
1700 * 11 = 18700
PITI * 12 = 18000
Principal = 3600
Maintenance = 3600
Depreciation = 1500

Net = (18700) - (18000 + 3600 - 3600 + 1500) = 1500

This is assuming I do the landlording myself. It seems unless some crazy appreciation happens this will be a money pit for not much reward. Any thoughts?