What would you do? Sell or Rent?

[Adam Philpot]

Curious to hear what you would do between renting or selling in my situation.

Here are the details:

I have a residential home in Nashville TN built in 2014 and great location. For tax purposes this would appear as my primary residence and avoid any type of capital gains tax.

If I rented it, I would clear $1400 a month after paying P&I, property tax and insurance (so not factoring in expenses but it’s a newer property). If I sold it I’d clear about 200k.

What do you think BP’ers? What would you do?

[Brian G.]

@Adam Philpot it depends on if/how badly you want to keep the property longterm. The 121 tax exclusion on the gain of a primary residence is pretty sweet. You have 3 years after moving out of a primary to sell and make $250k profit as a single person ($500k if married) and not pay any taxes (provided you lived there at least 2 years; consult a tax pro). In addition, if you clear $1,000/mo profit it would take you almost 17 years to make $200k (this is for simplicity; there are tax implications, appreciation potential and rent appreciation factors of course). If you can get a big tax free gain based on the 121 exclusion, I would give serious consideration to taking some chips off the table to redeploy into other investments before the 3 year window elapses, whenever that is. Of course if you love that property and want to own it 10 years from now you can access the equity without selling: primarily via a cash-out refi or Heloc.