Question:
“My mom needs to move to an assisted living home and we’re debating whether we want to rent her home or sell it. What do you suggest?”
Answer:
Everyone’s situation is different. But I’ll give you some general pros and cons:
Renting
Pros:
- You may get a better return than putting the money in the bank.
Cons:
- You could get a tenant who doesn’t pay rent or damages the home.
- You have to deal with general management of the house.
- IMPORTANT: Under IRS Code 121, your mother can likely shield up to $250,000 of gain when she sells. However, if she’s out of the house for three years, that tax break goes away.
Selling
Pros:
- It’s clean and easy. Sell the home and you don’t have to worry about management.
Cons
- Monthly income may be lower than renting. But you will have the principal to draw on.
