Don't Convert Your Primary Residence Into a Rental Property

In this video, we talk about why converting your primary residence into a rental property might not be a good idea. While the benefits of rental income, appreciation, possible tax advantages, and temporary moves may be valid reasons to consider, we also don't want to forget the potential loss of a capital gains tax exemption. Selling a primary residence can provide tax-free gains of up to $250,000 for individuals and $500,000 for married couples, which can be reinvested for further growth! Check out this video and consider the long-term advantages of selling and reallocating funds rather than converting your primary residence into a rental property.

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[RomanTommy]

I'm 54 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, and we are finding it impossible to replace them. We can get by, but can't seem to get ahead. My condolences to anyone retiring in this crisis, 30 years nonstop just for a crooked system to take all you worked for.

[quinnluong]

Kids, never follow your real estate agent for financial OR tax advice. Let them stay in their lane

[danb]

This video quality is really well done! Do you mind me asking what kind of camera and mic you use?

[stevengarcia]

If you can afford to hold onto it, the appreciation and equity will out weight the capital gains.

[Jamess]

Why not just get a Heloc on it while its your primary for the full equity. Then buy your next house and use your equity as you see fit and let the new tennants pay down your prior mortgage and the new heloc forever.

[alden_m_]

It's not exactly "free money" to sell, take advantage of capital gain exemption, and reinvest. You still have to pay ~6% in closing costs, which can add up, especially if your property is appreciating close to the capital gains exemption limit. Let's say you buy a home at $500k with $50k down, and homes in the area appreciate at $100k/year for an extreme example. In two years, your home is valued at $700k and you now have around $250k in equity. Let's say you reinvest in a $700k property to avoid capital gains. At 6% closing costs, that would be $42, 000 out of a $200, 000 gain. In two years, the property is worth $900k, and you decide to reinvest again. At 6% that would be another $54, 000, for a total cost of $96, 000 out of a $400, 000 gain. Compare that to a second scenario, where you hold on to that property and only sell once after 4 years. Your property appreciates from $500k to $900k. At 6% closing costs, that would be $54, 000. 15% tax on the $150k over the exemption limit would be $22, 500. In total, it would cost $76, 500 out of a $400, 000 gain. So you would actually gain about $20k comparatively (give or take) holding on rather than selling twice, even though you're paying taxes. Not to mention potential income from renting if you did so for 2 out of those 4 years. Not saying this is true for every scenario, but I would advise you do the math completely.

[ryanbeatty]

I have a duplex for 2.75 fixed and I’m planning to keep it as a rental. If I ever want to sell it I’ll just 1031 it

[vitbing]

if you do use it as a rental for a period of time, what does it take to convert it back to a primary residence ?

[dannymcclinton]

People would probably hold on to the property due to having an interest rate at 2.5% versus if I were to sell. Right now you're going to get 7 plus percent. Why would you still sell? Why wouldn't you take a heloc? You more than likely wouldn't cash flow due to the high interest environment currently

[jeffflammer]

Very simplistic for 9min video with the reasons near the end. You can combine 1031 and section 121. I would have renamed this.

[Thejasonrogers]

Okay suppose I rented a home out for example 20yrs can I come back and live in it for 2yrs as a primary so I can then sell it and take the 250k tax deduction? Technically I lived in it for 2 out of the last 5yrs. So is it 2 out of the last 5yrs that I owned it? If so then I wouldn’t qualify for the tax deduction

[Eppz]

Would you use this advice when using the VA loan to purchase primary residence properties? Right now, I’m trying to use as little cash as possible in order to build my portfolio!

[PP-yfkl]

So what if you moved back into the rental as your primary residence how long would you need to live in it before you sold it? Married or single?

[sjimenez]

If your are military that had to
move due to a PCS then the capital gains exemption period is extended by 10 years, meaning if you lived in it for two years out of the last 15 years you can exempt $250k in taxes if your single or $500k if your married

[tonyredemann]

Exactly a decision im debating now. Got a Springfield va townhome for $415 last November. Mived out here for military job. Plan on owning home for 13 years, maybe 1-2 more.
My current plan was to refinance 2025-2026 after rates lower. Was gonna do a 30 year and pay the difference to make it equal 15, just safer in case i need the extra cash at some point.
This way i can sell, retire from military witu pension and have a large sum of cash for final home.


Two coworkers keep trying to get me on the renting side instead though. Id really rather just sell for a large profit, get a nice house back home close to paid off. Get that paid off before 50 and have a paid off home with pension and another job. Just sounds so nice and safer and easier. For me that would be financial freedom and a point um super happy

[udchen]

I bought my house in 2020 and i am relocating to another state, i have lived in the house for 3 years now and planning to rent it out. Will this affect my capital gain tax exemption if i were to sell in a year or two?

[samknows]

Does the 2/5 year rule still apply to avoid capital gain taxes in California if you own another home at that time ?

Looking to purchase my second property

[DadLyfeYOLO]

What were the “different ways 7:40 “ you could 1031 and not ever have to pay the taxes on the profit?

[ia]

so if you convert your primary residence to rental, does it considered as an investment property now? and taxation will be much higher as for investment property? or will taxes remain as owner-occupied property? does anyone know?

[PremGaz]

I bought my first home in 2020 with a 2.7% interest rate. Thinking of getting a second home in 2025 at a lower interest rate. Can I legally rent out my first home and move into the second one? Is it a good idea, and what are the pros and cons?