We're accidental landlords. We purchased a single family home in May 2013. In April of 2017, we moved out, and found a renter the next month.
Our primary reason for not selling the home immediately was because we weren't sure we'd be happy with our move. Turns out we love it, and I don't see us ever returning to our old neighborhood. We are currently renting in our new neighborhood, so we only own the one property, although we are starting to think about purchasing a second. (Are there ramifications of that?)
We have good tenants but the numbers aren't good as an investment property -- our mortgage is $1680, and we rent it out for $1900 (we do the property management ourselves). This year is already a loss, due to a month of vacancy upfront, and then a burst pipe that cost 1K. I expect this to break even or worse moving forward, and I do worry about expensive issues like a new roof or new sewage pipe (both perhaps five years away).
I'm kind of thinking that we'll sell when these tenants move out - they indicated they would likely stay for a few years, until they can afford their own place, although of course you never know. (I also secretly hope they might want to buy our house, to save us the realtor costs). But, I want to make sure I'm taking into account tax implications with this decision. My reading of the 2-in-5 rule (linked below) is that we can avoid the capital gains tax if we sell the house within three years of moving out. Is this accurate? And, if so, does that mean we should be claiming the home as our primary residence on taxes this year?
And, could someone help me with a very very rough ballpark of the effect of the capital gains tax versus typical taxes from selling your primary residence? We bought the home for $300,000, I think we could possibly sell for 320-330, and our mortgage is currently $260,000. If our income matters, our taxable income is about 125K.
https://www.irs.gov/taxtopics/tc701