Choosing whether to sell or rent your home is a pivotal financial decision. Let’s break down the advantages and disadvantages of each option to help you make a choice that aligns with your goals.
Selling Your Home
• Pros
– Immediate Access to Equity: Selling allows you to access your equity right away, enabling you to upgrade to a larger home or invest in other ventures.
– No Landlord Stress: By selling, you avoid the challenges of property management, such as tenant maintenance and legal issues.
• Cons
– Forfeit Low Interest Rate: Selling results in losing your current favorable interest rate.
– Potential Capital Gains Taxes: Be prepared for possible capital gains taxes, which can be significant. It’s advised to consult a CPA for personalized advice.
Renting Your Home
• Pros
– Asset Retention: By renting, you keep your home, benefit from its potential appreciation, and capitalize on today’s low interest rates. Rental income can cover costs and even result in surplus cash.
– Flexibility with Capital Gains Exclusion: Renting for up to 2 years allows you to maintain eligibility for a $500K capital gains exclusion, provided you’ve lived in the home for 2 of the past 5 years. Long-term renting enables tax deferral via a 1031 Exchange when you decide to sell.
• Cons
– Landlord Duties: Renting involves responsibilities like maintenance and tenant management.
– Potential Prop 19 Limitations: Converting your home to a rental may mean losing the ability to transfer a low tax basis under Prop 19 if you’re over 55 and move later.
Decision Time
• Sell if: You seek immediate funds for a new home or investment, or if you prefer not to manage a rental property.
• Rent if: You want to retain the property as an appreciating asset and are comfortable managing tenant-related responsibilities.
Consider your financial situation and long-term goals to determine the best path for your circumstances.
What is your home worth? click here.
Homes for sale in Carmel Valley click here.
Shirin Rezania Ramos | 858.345.0685 | www.shirinramos.com | Compass, DRE 0203379
