To Rent or Sell Current Home

To Rent or Sell Current Home

Developer · Scarborough, NY · Member since 2016 · 10 posts · 3 votes

Hey BP Community - this is my first post/question, and I want to thank everyone in advance for any advice you might have to offer!

I currently live in a small/studio condo (in Brooklyn, NY), that I purchased about 1.5 years ago.  My original intention had been to turn this into my first rental unit when I decided to move.  

Well, here I am already looking to up-size (a studio apartment will soon no longer be big enough). While running the numbers (with help from the BP Rental Calculator) I am no longer confident this would be an effective rental unit for me. It appears, after my mortgage/HOA and additional holding cost assumptions (vacancy/CAPEX/repairs etc.), my expected rental income would not be enough to generate a positive cash flow (but rather potentially ~$200 in the red).

It is also worth mentioning that the value of this property has risen substantially in the short time I've owned it.  It seems after closing costs etc, I would make a decent profit upon selling (based upon comps in my neighborhood).

Given the above, I assume it make more financial sense to sell this property as opposed to renting it (with the hope of eventual positive cash flow and/or increased property value later down the road)?  

Additionally, are there any cost savings opportunities or efficiencies I should be aware of if I were to sell and purchase a home in "one step".  For example, are there ways to save on realtor fees in this instance (perhaps by working with one realtor for both transactions)?

Thanks again in advance for any advice/thoughts!

Brian

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Investor · Vancouver, WA · Member since 2014 · 359 posts · 143 votes
10y

It sounds like you should sell it.

I think after you live in it for 2 years you can sell and not pay any taxes so I would wait for the 2 year mark if you can.

You can try to negotiate with a realtor to take a smaller commission. I am not sure how often that is done.

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  • Investor · Vancouver, WA · Member since 2014 · 359 posts · 143 votes
    10y

    It sounds like you should sell it.

    I think after you live in it for 2 years you can sell and not pay any taxes so I would wait for the 2 year mark if you can.

    You can try to negotiate with a realtor to take a smaller commission. I am not sure how often that is done.

  • Rental Property Investor · Indianapolis, IN · Member since 2016 · 200 posts · 87 votes
    10y

    Or you can lease option it.  You get the rent, and sell it eventually.  Plus you get a better tenant and you won't have to pay a big commission to the real estate agent when you sell it.

  • Realtor · Atlanta, GA · Member since 2015 · 266 posts · 182 votes
    10y

    Hey @Account Closed was talking about is the homestead property exemption in which you have to live in the property for 2 of the last 5 years to pay not capital gain taxes up to a substantial amount. Don't quote me on this amount, but it's something like 250K depending on your state. This is like a 1031 exchange without all the crazy deadlines and loopholes you have to jump through.

    If you want to sell and don't want to pay a high commission, list it as an off market FSBO and advertise it online. I would also try to rent it at the same time and weigh your financial metrics.

    I hope this helps and I wish you the best of luck!!!

    Curtis

  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    10y

    @Account Closed is describing is actually a federal statute - sec 121 of the IRS code.  If you sell a house that you have lived in for 2 out of the previous 5 year period you can take the first $250K ($500K if married) of profit tax free.  There are no reinvestment requirements.  It is tax free money.  You may use this process once every two years.

    In your case you're already 3/4 of the way there.  By the time you list it, drag your feet selling and get it sold you could easily make that 2 year mark.  

    If it is truly a potentially good rental then you can actually try it out and rent it for 3 more years before selling ( as long as the calculations still have you living in it for 2 out of the 5 year period prior to sale).  If not, then I'd still recommend selling after you hit the 2 year mark and then taking the profit tax free.  Do what you want with the money then.

    The 1031 Investor5137 Reviews
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