Capital gains on first home

Capital gains on first home

Hi all,

Would love your feedback and advice.

The background:
* I bought a home back in nov 2011 for 280k with a FHA loan for ~265k.

* The home's appreciation and value is now worth over 400k but I do not wish to sell anytime soon.

* I am generating positive rental income on the home.

The question is this,

My thought is to buy another home since I've saved up enough again and could potentially buy a 1 family home BUT...

since I am qualified for tax free on capital gains if I sell the home (if I've lived in it for more than 2 yrs) up to 250k if I am single or 500k if I am married ONLY if I live in it...

Should I get another home and disqualify myself for a tax break on the capital gains for the first home?

I want to make sure I take a calculated risk...thoughts?

Please note: I have a spouse, not married legally but I do have the option of using her name for the next house if it allows.

I am looking for strategies, options, advice or general info on what steps you would take to create loopholes or am I out of any?

The next house if I get it will be a mother-daughter home, so I will receive supplemental rental income to offset that mortgage, while the first home could be completely rented out so that it is being paid off...



Tax Advice

First of all, I would contact a tax professional to help you with your tax strategies. Everyone is different and your whole financial picture will come into play, not just purchasing one or two houses.

So, you're saying if you buy another home you will be disqualified for the tax break because you bought a 2nd home? But then you say you don't really want to sell the first home at all. Looks like you have plenty of equity, so that's great, and you can borrow against that to help purchase even more properties.

It depends on what you want for the future. If you don't want to sell a home that is bringing you income, then don't sell it. My goal is to own as many rentals as possible to replace my J.O.B. income. So, if you purchase another home, the first will be a rental. Plus you say you will get some income from the 2nd property. These are all really good points.

You have to compare how much taxes you will save if you sell it now compared to how much money you will make in the long term if you keep it. What is more important for you right now? A tax break or more money long term?

Thanks mbjoseph... Here's

Thanks mbjoseph...

Here's the thing, my home is near a prime location, where demand is rapidly creeping up... So I know in ~2-5yrs, my home will top at 600K, close to where it peaked back before the economic collapse.

So if I am in a place years from now where I can sell it, I probably would (would love to receive blunt advice if you would hold for long term or sell)...

Please note (w/ PMI): I'm making $700 positive rental income.

And it also depends on my tax bracket a few years from now (if I do decide to sell)..

But I am ready to start a family now so I think eventually, a home would be best for us (my primary home is in the urban area) and we prefer to stay our it suburban America.

I do not want to borrow against to potentially reset my loan to where we are now in the market...just want to see different opinions and perspective on what I have in the stew before I pick out the better parts.

Again, thanks for you advice

Hold for awhile...

If you're in a position to hold it and you have cash flow, I would hold it. Now, if you watch the market go up in a few years and you can time it right.... you can sell then and get the most cash out of it. Now that you have some education in real estate, you can sell it when it's at the top of the market. As long as you're really watching, because the market will rise and it will go down again. History always repeats itself.

It's always good not to borrow too much and be over leveraged, but it's nice to have the option to take a home equity line of credit when you need it.

Can you do that and still buy a house to live in?

i like this thread

now I dont own any rentals but have wholesaled a rental to Dean & others & know how it works & have done other wholesale deals & understand rentals. If it were me, I would sell the hm for the cash and I think we are nearing the top of the market prob next yr(I could be wrong but I think & other investors i hve heard think the same.

with that cash, half of it at least I would buy rentals in the midwest like kansas city or Indianapolis or Tennesee, or in your area too if it is not too much of a bubble market. Especially when the market goes down & it could be a nasty downturn too well see but either way it will be a great opportunity to purchase rentals at discounted prices, which is what i plan to do btw Smiling

great advice btw mbjoseph(what is your name btw:) and thx for posting the question too & congrats on taking action, oh & also I would wholesale too, dont forget, when you are getting rentals & you get a deal & you dont want it after all just wholesale it, dont leave $ on the table, build a buyers list(not too difficult) & just make some money at that too-don't you think? God bless



Go faster do more! GFDM!

Thanks CaliTony

Thanks for the comments. BTW, my name is Margaret


and thanks too.



Go faster do more! GFDM!


"Here's the thing, my home is near a prime location, where demand is rapidly creeping up... So I know in ~2-5yrs, my home will top at 600K, close to where it peaked back before the economic collapse".

Hello, hope this message finds you felling well Smiling

The quote above though extremely positive and I loooove positive thinking. However This predictive thinking is one of causes of economic pain we experienced back in 2007/08. Though it would be great to have the value of your property increase, looking that far out is dangerous, in my opinion. Based on the trend of Real Estate. The market is day is day by day and so volatile it's not a good idea to set your sights so far out. Everyone was buying properties and hoping for equity to go through the roof. Buying 2,3,4 houses. Then the market dropped out. So just be careful (I am no psychic but, I think our market has a 10 year cycle) Personally I look and prepare for issues around 2017-2018. If it doesn't happen good. If it does I'm safe. Smiling Over the ears I have watched people loose their shirts buying and holding to long for equity gain purposes not preparing for market change. We aren't recovered yet.. Good luck and happy investing......



The only thing achieved without effort is: "NOTHING"


I couldn't agree with you more on that that should have been addressed glad you did.



Go faster do more! GFDM!

Find a CPA

Consult a qualified CPA. I would not rely on the advise of other investors. Every circumstance and situation is unique.

In fact, anyone doling out tax advise is no better than someone unqualified giving you re investment advise.


P.S. - Everything else is immaterial, irrelevant, and unnecessary.

Move back in later
To qualify for the exclusion, you must have used the home you sell as your principal residence for at least two of the five years prior to the sale. Your principal residence is the place where you (and your spouse if you're filing jointly and claiming the $500,000 exclusion for couples) live.

You could cash flow it for 3 years and sell it, or keep it for 10 years and move back in for 2 years then sell it. The only problem with that strategy is the tax laws may change. But in 10 years, cash flow and appreciation may offset any additional taxes.

You may not get off scott free...

Depends on your business plan. The above is not to be taken as tax planning advice. You should consult a professional for your specific situation.

you need a good accountant

we can all give you our opinion here, but ultimately, you need to consult with a good real estate tax accountant because your circumstances and goals will be different than those of others...

A good real estate tax accountant will help you decide what's in your best interest with regards to your long term goals; help you with 1031 exchanges (so you don't pay taxes when you sell), etc.

I would avoid to try to 'time the housing market'; that's how many investors lost big in 2006. Instead, if your intentions are to sell 'high'; don't get too greedy, don't wait until the last minute, because then you will probably compete with many investors who will be doing the same thing... sell when the market is climbing up, not when it's reached the peak...

Good luck!



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