It was sold in four days, but the plan took almost ten years to play out.
This was our home for the past three years and a rental property for the 7 years prior. We were not even in the market for a home when our neighbor knocked on our door and asked if I knew anyone that might be in the market for a home. He had made two offers on two different short sale properties and both had been accepted. After I found out his terms, which were outlined by the short sale lender, my wife and I decided to purchase the home. My neighbor had his offer accepted at a very favorable price and the short sale lender limited any sale he might have in the next few months to a $10,000 profit. There was plenty of equity left in the deal, so we moved forward.
Initially, we painted the house and installed new granite kitchen counters and granite window sills.
We rented the house to the same tenant for 7 years or so and when she decided to move out, we decided to move in. We wanted to take our homeowners tax exclusion for our current house at the time and set up the same for our rental property.
Prior to moving in, we added some cabinets, new flooring and new shutters. After we moved in, we renovated the pool and changed the water heater.
We put the house on the market on a Friday, had two open houses over the weekend and accepted a great offer over asking price on Monday evening. We did have to give the buyer an extension. The lender had some issues getting the loan together, but we only had to extend for 10 days and we did close without another hitch.
Many are surprised that you can do it various times. I have known several friends start with a small home and every few years purchase a little bigger home, using the homeowners exclusion to exclude their capital gains tax, until they are in the home of their dreams. The homeowners exclusion when selling your home is a very powerful way to increase your wealth.
If you have questions about the process, give me a call. I would be glad to share what I know. Remember, when you are ready to implement any financial plan, consult with your accountant to make sure you follow all of the rules and that the rules have not changed. The tax code is ever evolving.
For many of us, our biggest investment is in real estate. It is a happy day when a 10 year plan comes together.
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