Is it worth it to hold on to a property for 12 months with your name on the title so you can claim the profit as capital gains instead of income? Also, if you live in the home for 12 months can you apply as owner occupied?
Usually, you can use owner/occupied if you live in it a year. Some programs have SPECIFIC lengths (e.g., HUD Law Enforcement and Teacher Next Door programs
If you live in it to avoid capital gains, it has to meet the $250K ($500K if married) limits and you have to live in it 2 0ut of the last 5 years. You can take a partial deduction under certain circumstances…
See IRS Topic 701: http://www.irs.gov/taxtopics/tc701.html
You can also sell your home with ownerr financing and spread the capital gain out over the term of the contract.
Keith
Is it worth it to hold on to a property for 12 months with your name on the title so you can claim the profit as capital gains instead of income?
That depends on a number of factors, the main two probably being your tax bracket and your goal(s) for investing in the first place.
Capital gains is currently 15%. If you’re in a 30-50% tax bracket, then it might be a good idea to hold for long term gain. BUT, if you’re getting into REI to generate income, either extra or to replace, then you’re defeating your goal by holding long term, especially since those payments have to be paid every month.
Also, if you live in the home for 12 months can you apply as owner occupied?
Each lender will have their own requirements for owner occupied loans. However, it’s NOT worth living there just to get a point or two shaved off the interest rate. IF the deal is so skinny that it would make a difference, then it’s not a deal.
Raj
I have to respectfully disagree with this. If you are planning to move into the property, I’d go ahead and finance it as Owner Occupied. That’s how we got our start in real estate investing. I would NEVER suggest that someone falsely obtain OO financing if they aren’t moving into the property, but if your plan is to move in when you purchase it - it’s OO. Who knows what will happen in 2 or 12 or 24 months!?! We’ve bought property that we intended to stay in for only a couple of months and were there for over a year, and we’ve bought stuff to stay in and wound up moving in a matter of weeks.
And, in my opinion, if it will save you on the interest rate and you’re willing to live in it - it’s worth moving in. Like I said, that’s how we got our start - by buying multi-unit properties, living in one of the units and renting the rest out. We got great rates that way, and then when the next deal came along we did it all over again.
That’s my 2 cents…
Karla in Amarillo
Are there any issues if you purchased a property as Owner Occupied and decided to resell the home after 4 months instead if you have a lender that does require seasoning. Is this a big issue if you’ve changed your mind on continuing to occupy the property.
Trinity
Sorry doesn’t require seasoning