Author Topic: Should cap gains residency exclusion be a factor in sell vs. continue to rent?  (Read 256 times)

Villanelle

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We rent out what used to be our primary residence.  We lived there more than two years then moved due to my husband's military service.  Because of that service, we qualify for an exemption that essentially makes the "must have lived ther 2 of the lat 5 years" into "2 of the last 15".  We are on about year 12. 

If we sold today, the profit (well, the amount more then we paid), would be ~~$70k.  Not awesome numbers, but at one point we were down about $150k, so overall we are happy.  The rental makes okay money.  Mostly we kept it because we would have been selling for

waltworks

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You left out all the meaningful numbers, so who knows?

-W

tralfamadorian

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Should cap gains residency exclusion be a factor in sell vs. continue to rent? Absolutely! Take a few minutes and set out a buy vs sell numbers comparison.

Rent:
Rental Income - PITIA - Avg Vacancy - Repairs - CapEx - Management = Net Yearly Income

Sell:
Selling Price - Realtors' Fees - Misc Selling Costs = Net at Closing * 7% Avg VTSAX Returns

lhamo

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That isn't a huge profit, so probably not a big deal one way or another.

Is there any chance you might move back to that location/house sometime, even if only relatively short term?  If there is more than a 50% chance of that happening, I would hang on to the house.  That way you can re-activate the primary residence clock and take the full exclusion (less rental depreciation, not sure how that works) when you do finally sell.

Villanelle

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Hmm.  Looks like only half my text posted.  Sorry about that!  I'll try to update the post with everything else that was originally included when I have some spare moments.