Hi All,
I am Cyndee. I am new to these forums.
One issue I am currently grappling is whether to sell a rental property. Would welcome advice and insights from others who’ve done this.
I currently own a rental property in the Washington DC market. The property has appreciated significantly since we bought in 2014 ~180,000 and our tax advisor advised that since we lived in the property as a primary residence for more than two years, we would be able to take an exemption of capital gains (I am Foreign Service, so it’s 2 out of 10 years prior to sale) but would have to pay depreciation recapture. The depreciation tax would likely cause us a hit of ~28K federally and locally. And there’s selling costs, commissions, etc. I estimate that, once we pay the mortgage (we took a heloc from this recently to buy a house), we would probably net cash about $150,000 that we would put into other investments.
Or, we could just keep renting the property, which has current month-to-month tenants. Before the heloc, we were generating monthly rental income of $400. But with the heloc balance rolled in, we’re losing $400 monthly. (But as a whole, this reduces our net taxable income and also, we’re building equity). We need to raise the rental rate (we did not increase during the years renting because we have great tenants but we realize now we’ve fallen behind on the rental price) and the unit above which is laid out exactly the same currently rents for $700 more. But we wouldn’t raise until summer when rental market is better, and the increase will be gradual 1.5-2% a year. We have 20 years left on the mortgage.
I am leaning towards selling because it would reduce current cash flow pressures. My hesitation is that it’s been ingrained in me to always try to hold on to property for wealth building. But really, will I ever benefit from this?
If I sell, any advice on where to invest the cash?
We do not want to roll this into another property at this point because housing prices are just too crazy.
Thank you for reading.
I am Cyndee. I am new to these forums.
One issue I am currently grappling is whether to sell a rental property. Would welcome advice and insights from others who’ve done this.
I currently own a rental property in the Washington DC market. The property has appreciated significantly since we bought in 2014 ~180,000 and our tax advisor advised that since we lived in the property as a primary residence for more than two years, we would be able to take an exemption of capital gains (I am Foreign Service, so it’s 2 out of 10 years prior to sale) but would have to pay depreciation recapture. The depreciation tax would likely cause us a hit of ~28K federally and locally. And there’s selling costs, commissions, etc. I estimate that, once we pay the mortgage (we took a heloc from this recently to buy a house), we would probably net cash about $150,000 that we would put into other investments.
Or, we could just keep renting the property, which has current month-to-month tenants. Before the heloc, we were generating monthly rental income of $400. But with the heloc balance rolled in, we’re losing $400 monthly. (But as a whole, this reduces our net taxable income and also, we’re building equity). We need to raise the rental rate (we did not increase during the years renting because we have great tenants but we realize now we’ve fallen behind on the rental price) and the unit above which is laid out exactly the same currently rents for $700 more. But we wouldn’t raise until summer when rental market is better, and the increase will be gradual 1.5-2% a year. We have 20 years left on the mortgage.
I am leaning towards selling because it would reduce current cash flow pressures. My hesitation is that it’s been ingrained in me to always try to hold on to property for wealth building. But really, will I ever benefit from this?
If I sell, any advice on where to invest the cash?
We do not want to roll this into another property at this point because housing prices are just too crazy.
Thank you for reading.
