Sell.
Here are my questions:
1. From a tax perspective on a sale I read IRS publication 523 and believe we would qualify to exclude the gain on the sale since this was our primary residence for two of the past five years (assumes we sell in 2024) even though it has been a rental property since we moved out. Did I understand the publication correctly? Related to this we would not meet the two of the past five year test if we sold in the summer of 2025. ---Yes, you understood correctly. Sell it - you'll be locking in tax free gains. At 35% tax rate, it is a lot of money.
2. Non-factor
3. How do I compare the investment returns on the rental to selling and investing the proceeds?
Rental: ~$16K assumed annual cash flow, inflation level property value appreciation
Investing Proceeds: $500K proceeds - $45K selling expenses - $9400 tax on depreciation recapture = $445.6K invested 65% VTSAX and 35% VTIAX with dividends reinvested. --Your 445K rental is returning 16K annually. That's 3.6% return. Portfolio visualizer shows 65/35 US/EX-US portfolio returns 9.53% annually. If you buy and hold, you can expect to come out ahead of rental.
4. What else should I be thinking about in this decision? -- Think about all the time and effort you spend maintaining your property and renting it out. Selling this rental will get rid off all that headaches.
Statistics: Posted by Metsfan91 — Thu Apr 04, 2024 12:04 am — Replies 2 — Views 183