The other day visited a friend and her husband who was feeling pressured to sell their house. They recently joined their households and this house had been converted to a rental property. The problem was that they were feeling pressured to sell because of Capital Gains laws. According to the Capital Gains law, you must live in a home 3 out of the last 5 years that are preceding the year you sell the property in order to avoid Capital Gains. This year will be the fifth year and they were feeling pressured to sell the house. My question when we met was, œDo you really need to sell the house? I know, kind of a strange question for a realtor, but my mission isn™t just to list and sell property. My mission is to support your efforts to build your wealth or make your life simpler¦which ever is your priority at the time. I created a detailed list of options including, selling now and possibly needing to bring money to the closing table, waiting until later in the year in hopes of the market improving, renting the house for several more years, or renting it out until the market improved, then selling it in a 1031 Tax Deferred Exchange. With a 1031 they could sell the single-family house and purchase a 2 “ 4 multi unit for a profitable cash flow. I provided estimated œSellers Net Sheets for the different scenarios so that they could look at real $$$ numbers and compare the cost of continuing to rent the house or sell. Afterward, I encouraged them both to review the list of options, then add or modify according to their thoughts and opinions. I suggested that they do this separately then compare each other™s changes. I wanted them to have a clear picture of what their priorities were and what points they agreed upon or needed to discuss further.
My friend is still deciding what is best for their unique situation and my thoughts were just a starting place. But unless you are in financial difficulty with a mortgage, the most important thing for EVERYONE to remember is that YOU HAVE OPTIONS. Don™t be quick to think that everything is a dead-end road.