“Hi Gary. Were buying a bigger home and considering keeping our old home as a rental. Do you think thats a good idea?”
***ANSWER:
Great question, one I hear from many of my clients. Theres no precise yes/no answer, but here are some things to consider:
PRO
1.. Real estate has been the basic building block of wealth for many well-off families. I own rental real estate and very much believe in it.
2. The house is a property youre very familiar with, so youre not coming into an unknown.
3. If you want to start investing, a single-family home is a simple way to start.
CON
1. If youve owned and lived in your home for at least 2 of the past 5 years, you can sell it and exclude up to 500K of gain (250K for singles). Once youve been out for too long (usually 3 years), youll lose that tax benefit.
2. While single family homes are a simple starting point, they are not the ideal investment.
3. If your home is in pristine condition, you may heartbroken if tenants mistreat it.
