Most people dread moving day. It can be a stressful and emotional time. Packing boxes, straining muscles and loading trucks isn't anyone's idea of fun. But my wife and I look forward to moving day because it's the day when we can realize a return on an investment.
Before May 1997 you had to pay taxes on any profit you made on the sale of your home or use the money to buy a more expensive home. But since that date the IRS has changed the rules, giving home owners a way to make money tax-free. When you sell your residence, you can take up to $250,000 in profit if you are a single tax-payer, and $500,000 if you are married, without paying a single dollar in capital gains taxes. The stipulations are that you must live in the home for two out of five years and it must be your primary residence. Sales of second homes and rental properties are excluded. There are no requirements to rollover your proceeds or to reinvest in another home.
For more information, visit http://www.irs.gov/ and read Publication 523 on the sale of a primary residence.
So what type of home do we look for if we know that we will be there a relatively short time? The most important aspect is value. I look for a home that is well priced, but is in need of upgrades to make it more appealing. I have no desire to spend all my weekends on Bob Villa type projects, but home improvements such as landscaping, new paint, and new countertops will increase my home's value. We are not "flipping" houses, but making them our home, enjoying living there, and then moving on to another possibility.
We are soon approaching the time when we will have been in our home for two years. Friends are asking if we will put our home up for sale despite the fact that this is currently a buyer's market. The answer is yes. I might not realize the great profit that was possible in past years, but that is irrelevant. I will sell for the best price obtainable in the current market, and then will reinvest in that same lower range. There are bargains in real estate at this time and in my business I have enjoyed helping investors find the properties that will grow their finances. I hope to be able to do the same for my family.
I realize that this plan of moving so frequently is not for most people, but I am fortunate to have a willing spouse who understands that this can be a way to help us reach our financial goals. And since she was by my side during my military career she has had plenty of experience in packing and moving!
Dan Parker
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