bought home in residency... what to do now

[bovie]

Would this situation not qualify for partial exclusion under a work-related move?

https://www.irs.gov/publications/p52...blink100073096

OP—would you have been living in the house as well for those 17 months? It seems that you would be required to individually meet the use/residency test as well to qualify for MFJ exclusion amount.

[eyeinvest]

Would this situation not qualify for partial exclusion under a work-related move?

https://www.irs.gov/publications/p52...blink100073096

OP—would you have been living in the house as well for those 17 months? It seems that you would be required to individually meet the use/residency test as well to qualify for MFJ exclusion amount.

Unfortunately no... my residency is in another city.

But it seems like though according to that link that she would be eligible for partial exclusion of 17/24 x 250k if she were to file as single or married filing separately.

[The White Coat Investor]

Very interesting dilemmas in this thread.

[FIREshrink]

Can they 1031 into a new property in their new location, if it wasn't an investment property alone but rather a place to live and also an investment property for several years, then a place to live for seventeen months?

[Lordosis]

Depending on what you can get for that house the taxes are going to be significant. Might be worth sticking around for a few extra months.

[Brains428]

I'd rent it out and get a property manager. See if you can rent it out as individual rooms to med students, and by the door count get a discount from the property manager (many give a discount at 4 doors). OR you can try to manage it remotely. A lot of that requires more due diligence on the front end- making sure you have decent pictures before people move in, making sure you have an idea of the remaining life of things to project capex (HVAC and water heater, refrigerator), and appropriately vetting tenants before move in. It'll give you time to get your feet wet in real estate. And it's a substantial property that you may be able to 1031 into a multifamily in the future (which is where you'll find the most bang for the buck out of this equity).

If you find a job that you like that just so happens to allow you to live in this home for a few more months, great. However, I wouldn't stick around for 6 months to avoid taxes.

[eyeinvest]

I'd rent it out and get a property manager. See if you can rent it out as individual rooms to med students, and by the door count get a discount from the property manager (many give a discount at 4 doors). OR you can try to manage it remotely. A lot of that requires more due diligence on the front end- making sure you have decent pictures before people move in, making sure you have an idea of the remaining life of things to project capex (HVAC and water heater, refrigerator), and appropriately vetting tenants before move in. It'll give you time to get your feet wet in real estate. And it's a substantial property that you may be able to 1031 into a multifamily in the future (which is where you'll find the most bang for the buck out of this equity).

If you find a job that you like that just so happens to allow you to live in this home for a few more months, great. However, I wouldn't stick around for 6 months to avoid taxes.

Thanks! I think if we were to keep renting it out it would be by room. That’s a great tip about the 4 door discount if we go down the property manager route. It’s a location we definitely don’t want to live long term so I’m of the same mind when it comes to sticking it out until 24 mo are up id we can avoid it.

Do you know how long we would have to be out of the house and renting it in order for it to qualify as an investment property and be eligible for a 1031 exchange?

[eyeinvest]

Very interesting dilemmas in this thread.

Any advice for us Dr. Dahle?
Your story of being an accidental long distance landlord definitely impacts our thought process on this.

[mamaham]

Depending on what you can get for that house the taxes are going to be significant. Might be worth sticking around for a few extra months.

begs the question... if the job ends up being an hour away, how significant do the taxes have to be to want to commute???

[mamaham]

It’s a location we definitely don’t want to live long term so I’m of the same mind when it comes to sticking it out until 24 mo are up id we can avoid it.

just out of curiosity... why did you buy a home in a location that you definitely don't want to be in?

whatever you do, make sure to take the time and learn the life lesson here... Make financial decisions with the future in mind. In this case, if you are only going to live somewhere for 17 months, don't buy a house. Oh well, it happened, make the best of it, but also learn from it.

[eyeinvest]

just out of curiosity... why did you buy a home in a location that you definitely don't want to be in?

whatever you do, make sure to take the time and learn the life lesson here... Make financial decisions with the future in mind. In this case, if you are only going to live somewhere for 17 months, don't buy a house. Oh well, it happened, make the best of it, but also learn from it.

I agree not the most forward thinking but her parents really wanted to sell it to her as a way to help her out and kind of pushed it on her. She doesn't have much financial background and did it because her dad said it would be good. In her defense though at the time she was thinking of staying longer for fellowship but those plans changed.

Either way I think regardless of whether we keep renting it or sell it and pay some capital gains tax it will still be a boon.

[VentAlarm]

Live where you want to live and pay your taxes. An 800k long distance first rental sounds awful.

Don’t let the tail wag the dog.

[abds]

So the parents gave your girlfriend a deal on the house to the tune of $300k or more. And as at least one option she’s gonna turn around and sell it in less than 2 years and pocket that profit? And all parties are ok with this?

[Brains428]

There are safe harbor rules about when one can qualify a property as a rental if previously a primary residence. Important thing is to show intent to use it as a rental/investment (like charging fair market rent). Whatever you do, I'd keep records in the event that you get audited. I'd also talk to a CPA (but the CPA is only as good as the information you give them... best to get a CPA who is familiar with RE, as well).

I would read the bigger pockets forums, also.

[eyeinvest]

So the parents gave your girlfriend a deal on the house to the tune of $300k or more. And as at least one option she’s gonna turn around and sell it in less than 2 years and pocket that profit? And all parties are ok with this?

They are ok with whatever she chooses to do with it.