Maybe you bought a home a few years back and are contemplating if you might sell or keep your property. People move for all sorts of reasons—relocation for employment, need for more space, the ability to afford a better property. But selling a home is a lot of work and so is renting it out—what should you do?
Jason Hartman’s team is here to provide the information you need to know to make your decision.
If you are buying another home, you may need to sell your existing property to purchase the new one. But if this is not a consideration, consider whether or not you’re home will be sold at a loss. If so, it’s probably better to hang on to it and make money by renting it out.
If the sale of your home results in a capital gain, ask yourself if you will be able to exclude the gain from federal income taxes. If you aren’t, you might reserve some of the proceeds from the sale to cover your taxes. Of course, renting your home out is an easy way to make money, especially if you hire a property manager who is willing to do all the work (and at a relatively low cost!).
In making your decision, you’ll want to focus on the implications of taxes. If you rent your home for a short while, you may qualify for the capital gain exclusion when you sell your home. If you rent permanently, the rules will be different when you decide to sell.
If you’re going to rent your home out, you’ll need to charge rent that is high enough to cover the costs of the property, and then some. If your home is not in an area where this is possible, it may not be worth it. You’ve got a few things to decide—who will pay utilities, who is responsible for yard care, etc. If organization is not your strong suit, it may be time to hire someone to help.
Think about how far from the area you are moving and whether or not you are comfortable hiring a property manager. If you are, moving will not be a problem—many people manage properties they’ve never even been to.
As with most things, it will be useful to consult with a professional before you make your final decision.
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The Young Wealth Team