To Lease Or Not To Lease
My wife and I purchased a home a little over a year and a half ago. Unfortunately my new job requires me to live in the county in which I am employed. So faced with needing to move we ran into a delimma that I need some help with.
My in-laws have moved to California for a year and will let us have their house rent free for that time which is great. The house we own was purchased brand new and our realestate agent is trying to sell us on Leasing the house. She has informed us that after all said and done we would walk away with only around $10,000 in profit if we sold. I am very much in favor of having this as an investment property for some time but I am not sure if this is the best thing for us at this point.
Can someone explain to me why it would be so much better to rent the place out in this situation and keep it as an investment?
Thanks so much.
[ Edited by swtato01 on Date 01/25/2007 ]
Thanks to you both for the responses. The numbers are as follows. We purchased the home for $169K. We also put $5K down. We spoke to a realtor and she said that she would be able to rent it out for $1,600 a month. With every bill included our monthly payment total is $1,375.
Sounds like a great opportunity, tenants paying your note & you living essentially "free" for a year. Only downside would be if your local realestate market declines.
One more thing, you may have to squeeze another 6 months of this being your primary residence if you plan to sell within 5 years..This is from the IRS FAQ
Question: I lived in a home as my principal residence for the first 2 of the last 5 years. For the last 3 years, the home was a rental property before selling it. Can I still avoid the capital gains tax and, if so, how should I deal with the depreciation I took while it was rented out?
Answer: If, during the 5-year period ending on the date of sale, you owned the home for at least 2 years and lived in it as your main home for at least 2 years, you can exclude up to the maximum dollar limit
Eric[ Edited by fdi on Date 02/14/2007 ]