Here are some details of the property (town home) I own
Timeline:
Bought: Oct 2013
Lived in it (Primary Home): March 2018 (4.5 years)
Rented it: March 2018 to Current
Some numbers:
Original purchase price: $200,000
Original down payment (including closing cost): $45,000
Current market value: $410,000
Current loan balance: $110,000
Gain if sold now (8% closing cost, clear remaining loan balance, assume no upgrades): ~$265,000
Current rent per month: $2000
Monthly payments (EMI + HOA): $1800
Here are a couple of questions I have in mind that could use some help:
- If I sell the house within the 5 year period (2 years of primary residency + 3 years of renting, i.e. before March 2021), I stand to not pay any taxes on capital gain. Irrespective of whether the market appreciates any further, wouldn't it make sense for me to sell the house in the 5 year period and cash out on the gains and not lose taxes? After this window, if I sell the house I would either have to pay taxes or do a 1035 exchange (which isn't easy IMO since the time window is small).
- Since the time I've bought this house, the house value has appreciated well. The previous highest value of this house (ever) was $280,000. The ROI is high (I put in $40,000 down payment for the initial acquisition), however, the ROE (Return on Equity) is low assuming I have about $265,000 equity built and yearly gains returns of 4.52% ($12,000 gain after all expenses). The question here is how should I leverage the equity I have built here - I could sell (also due to question #1) and reinvest the money else where OR extract equity out of this (HELOC or refi) and invest elsewhere
I'm happy to clarify to help me get better answers.
