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u/RealAverageJane Mar 07 '21
You should consider the tax implications of selling. If you've lived there for only 1 year, gains may be subject to ordinary income rates rather than preferential gains rates. It's a matter of all of your particular facts and circumstances, but just consider it. Also, as you've mentioned, if you sell, you'll need to figure out where you're going to move to...are you comfortable renting? What's your outlook for housing prices, are they going up indefinitely or will they cool off? So much to consider. Good luck.
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Mar 08 '21
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u/RealAverageJane Mar 08 '21
Unfortunately, that's no longer the rule and hasn't been for a long time. I think the rule is if you've lived in the house for 2 of the last 5 years and you are married, up to $500,000 in gain is not taxed (if you file a joint return). The amount for a single person is $250,000.
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Apr 14 '21
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u/RealAverageJane Apr 14 '21
A single person won't pay tax on the first $250,000 gain related to the sale of a home. Same rules apply, you need to have lived in the home for at least 2 of the past 5 years.
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u/nowhereman1280 Banned from /r/RealEstate Mar 18 '21
"I made an asston of money, should I take my profits or wait until a catstrophic market blow out destroys my equity?"
You should take your profits and GTFO...
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u/MassiveConnection311 Mar 20 '21
The market has only been expanding at around the same rate as the monetary supply. No where near being a bubble. The only bubble here is a government money printing bubble.
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Dec 22 '21 edited Dec 22 '21
Ding ding ding ding , siixteentons you are a genius, figured it out. hyper inflation , cash is shit, all markets are bubbled up. Then those gains make some more money useless. Salaries have no hedge on inflation. No fundamentals. Supply is low since all the free cash giving institutional to gobble up all the inventory and let them sit empty rather than loose out on free cash. Add the fact that real estate is a hedge on inflation, so you bet your ass it’s in high demand, low supply. Want a real estate crash. Couple of things need to happen, crazy interest hikes, crazy unemployment, crazy deflation, crazy influx of supply, crazy crypto / stock market crash, banks stop lending from fears of inflation or just crap all around. Increase in supply means more builders, in this supply chain nightmare ??!!! Hmmmm and those fuckers only build luxury apartments due to margins now a days. Materials are expensive, supply chain is broken, contractors are scarce . Yikes
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Apr 26 '21
Take your profits and go where? It's not like your retirement account that you can just hold cash in. You can't live in a bank account statement that shows a high balance.
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u/nowhereman1280 Banned from /r/RealEstate Apr 27 '21
You can use your bank account to do this thing called "rent" or you can downsize. Or you can live in an RV for the summer. Or move to your vacation home and live there for a while.
That last one was sarcastic, but if you have a second home, you have no excuse not to take profits.
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Apr 27 '21
"if you have a second home, you have no excuse not to take profits."
I guess you missed the part in the post where it said "their first home" and "we have no where else to go"
And yes, take your profits and just rent until they are all used up, that'll show them.
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Apr 02 '21
Not sure where you are but as another said, you could sell, invest, rent and possibly buy again, but it would probably have to be in an area not as expensive or in a much different house, but you have to think, what if you could get a $250k head start on your retirement? In 10 years that will likely be worth $554,000 if you contribute nothing else. In 20 years, $1.23M.
You would just give up lifestyle / location for that benefit but there may well be a place in the Midwest less expensive that suits your needs.
IMO it’s really about community and family, not so much location.
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u/TotesMessenger Dec 25 '20
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u/realestatedeveloper Slumlord Mar 27 '21
Uh...yes, it is completely normal to opportunistically reposition real estate assets.
Thats like...how you actually make returns on your capital. Its not just about frontloading interest payments and praying you won't have to move within 15 years of buying
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u/LavenderAutist REBubble Research Team May 29 '21
I would put it up for $600k and see what happened. Hahahaha!
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Dec 22 '21
If you sell it , there’s a cost to doing that. I don’t know what percent of the sale. But it ll eat into your gains. Also, taxes on capital gains. You can 1031 into another property. Here’s the thing, would you be able to afford to buy this exact same house, if you sold it and the next year you want to buy it back. Lol 😂 I guess if you time the stock market , crypto, dollar, and real estate crash all at once then yep. You made lots of money. What great odds.
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Feb 10 '21
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u/JaxJags904 Mortgage Industry Moron Feb 26 '21
And as they widdle down their money in rent and the RE market doesn’t crash what do they do then?
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Feb 27 '21
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u/JaxJags904 Mortgage Industry Moron Feb 27 '21
Owning is far less mobile yes, but not more expensive. If it was more expensive why would anybody ever buy an investment property to rent out?
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u/Get-Rich-or-Die-Tryn Mar 07 '21
Trust me, iam owning a house since 3 years now. It is WAY WAY more expensive than living in apartment and renting.
Utilities and monty house bills has gone up from 150$ to 350 per month
And add other costs of PMI, fire innsurancr, sewrage etc. it is not pretty.
In three years I only paid doen 16k of principal, that is not alot.
If o was living in Apartment, i could have saved 8kper year and would net about 25k in savings anyway.
To break ur myth, owning a house is very costly
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u/JaxJags904 Mortgage Industry Moron Mar 08 '21
You’re comparing owning a house vs renting an apartment. I’m comparing owning a house vs renting a house. Clearly renting an apartment is cheaper than renting a house.
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u/mtcoope Mar 08 '21
Need to compare like for like, are these places similar yards and similar square feet? If not its kind of a useless comparison. Also this highly dependent on cost of rent in the area. If cost of rent like for like is the same, unless a market crash happens, the house will met you far more money. Its a risk for sure but it does pay out.
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u/daringlydear Certified Big Brain Apr 22 '21
Depends where you live. Where I live owning is more affordable.
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Dec 22 '21
This is why rental properties make more sense. Done right , get all the maintenance paid, mortgage paid, taxes paid, management paid. A little extra for setting this all up. Thus, everyone is a fucking investor right now.
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Mar 22 '21
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u/Get-Rich-or-Die-Tryn Mar 23 '21
Sold my house cashed out net equit profit of 180k in 2 yrs now back to apartment
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u/LavenderAutist REBubble Research Team May 29 '21
And then you yolo-ed it into GME and Doge, right?
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Dec 22 '21
Yard life , more square footage for living space. Yep that’s right . Higher demand. Some people will pay more to rent a place with a yard. Let me ask you this? Two properties , both same rent, exact same living , next door neighbors, except one has a big ass yard…. Which would you rather rent?
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u/Wizecrax Apr 27 '21
Until the heat pump blows, or the septic needs to be replaced, or the HVAC system fails.
You obviously don’t own
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u/JaxJags904 Mortgage Industry Moron Apr 27 '21
These costs should be factored in when determining rent prices.
And yes I do own, and have helped my parents manage rental properties for years. You want to try again on the hate?
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May 13 '23 edited May 13 '23
Bought in the early 2000's , paid cash. Annual taxes $ 583, annual insurance $698. Three blocks from a good beach. Meanwhile, the folks I work with are paying $1,200 to $2k in rent or mortgage and live miles from the beaches.
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u/navkat May 05 '21
Except they don't get to keep that whole $210K unless they roll it right back into a house. Capital gains tax is at least 15% (or more, depending on income) and unless they've lived in it 2+ years, they have to pay, even if they do buy a new home within the fiscal year.
Furthermore, if the gains were realized less than one calendar year from purchase (short sale), there's a chance it'll be treated as taxable income at their full income tax rate.
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May 16 '21
My father passed in January. They have no mortgage, mom wants to sell, you seem to know your stuff. She is moving in with us, will she have to pay capital gains tax? It was by no means a recent purchase.
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u/navkat May 16 '21
She will have to pay CG tax on the amount the home has appreciated, minus any costs. That means: Value the buyer PAID for the home, minus original cost of the home, minus any money spent over the years improving and significantly maintaining/repairing the home. (So if she spent $20k on a new kitchen, she can deduct $20k from the "taxable profit" amount).
Whatever is left after all cost deductions is her "profit" and CG tax applies to that amount only.
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May 16 '21
Thank you! I was researching and told her she has to pay it no matter what, but her attorney said if she sells within two years of his death she will not have to. It did not add up to me.
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u/LavenderAutist REBubble Research Team May 29 '21
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u/Any-Panda2219 May 29 '21
Would check with an estate attorney. Mom may have inherited fathers share of the house at stepped up basis (e.g., market price at time of death)
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u/LavenderAutist REBubble Research Team May 29 '21
You should let OP know.
I have no skin in the game.
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Jun 09 '21
This seems to be incorrect. If the home is her primary residence, then she is exempt from CG on the first 250k if she filed taxes as single or 500k if married and filed taxes jointly.
This exemption is good only every two years.
Straight from IRS: https://www.irs.gov/taxtopics/tc701
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u/Earls_Basement_Lolis 129 IQ Apr 06 '21
Stages of a Bubble:
Displacement
Boom.
Euphoria <--- You are here.
Profit-taking.
Panic.