Need advice on how to convert a primary to investment property

[Cliff T.]

Hi BP- Looking to get some advice on the best way to convert my primary residence to a rental property. In short, I purchased the property in 2013 for approx. $420K and the value is now closer to $475K. I would prefer not to sell the property bc the rental market is hot in the area and I should be able to find tenants to cover my costs quite easily. A few questions on what happens if I convert to an investment property: -Will the depreciated value be considered $420K or $475K? -What steps, if any, do I need to take with my bank? -What happens if I sell the property in 2019? Will I still qualify for the Home Sale Tax exclusion of $250K? Or does that only apply to primary residences? I've searched quite a bit online but wasn't able to find a good resource for these questions. Would love any help from the BP community. Thanks!

[JD Martin]

The depreciation figure is going to be based on what you paid; there is no depreciation value for hypothetical equity (which is what your current value is). As for your bank, I would probably confirm that they wouldn't call the loan if you turn it into investment property - if you have always been on time and faithful, this is probably not an issue. Something is still able to be free from capital gains if you lived in it a certain number of prior years (I think it is 2 out of 5 but do not quote me here).