Blog 2
Lisa Li
Principal
Licensed Broker
Phone: 617-335-4829
e-mail:
lisali.realtor@gmail.com
WeChat: lisa_fengli00
Proficient in self-housing and rental housing in all good school districts and high-end districts in the Greater Boston area. If you need to buy or sell a house, please contact me.
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All blogs on this site are original, please do not plagiarize, all opinions and experiences are personal opinions, and are for reference only.
Should the house be sold or rented out?
In the previous article, I mentioned that self-housing is an investment that earns tax-free income. However, not everyone has the heart to let go of the house they lived in. Many people rent out the old house after moving out to earn rent and become a glorious landlord. Because of the low price and low interest rate at the time of purchase, such a rental house has a small burden of repayment and a good cash flow. Often when I see such a situation, I can only shake my head. They are not my clients, so I naturally won’t gossip, but I feel sorry for others that this great opportunity to count cash is not taken advantage of and thrown away in vain. I am sorry for my hard work. Have you stayed in the house for more than two years?
Some people may Argue: I sold this house, and the value of the money in the bank is falling day by day, so I still want to buy a house, and now that the house is expensive, I can no longer buy it at the original price. I would like to say: Is the original price so worthy of nostalgia? The result of nostalgia is that a lot of income is not put into one’s pocket in vain, and the result of not realizing it is that you will pay value-added tax as an investment house in the future. "It will make you bleed! In addition, self-occupancy communities are different from rental communities. Your self-housing must be in a good area. In such an area, housing prices are high, but the rent you can receive is similar to that of a cheaper area. For example, in first-tier cities like Newton and Belmont, the rent is similar to that in third-tier cities like Waltham and Watertown, but the housing prices are much lower. Therefore, the correct approach should be to return one yard to one yard, and not to confuse the investment of self-housing and rental housing. It is best to sell your home and change to a rental house in a rental area.
So under what circumstances do you have to change your self-occupied housing into a rental housing? Please see the following situations:
1. The housing market deteriorates, the house cannot be sold, or the house has to be sold at a reduced price. In this case, rent out the house first, because it is a good area, and hope that the house price will rise. In such a situation, we can only give up the Nuggets and let the house become a machine that provides cash flow. As for value-added things, we will replace them with 1031 rented houses to avoid tax in the future. Regarding 1031 Exchange, I will talk about rental housing in detail in the future.
2. The land and area where the house is located have great potential for development. When you have money, you can push the house or build it into a big mansion and earn a lot of money. So, let’s rent out the house first, get some cash flow by the way, build a house when we have funds and the housing market is hot again, earn tens of millions in one fell swoop, and be worthy of my hard work living in the house for so many years.
Yesterday I have mentioned several conditions for the exemption of value-added tax for the sale of self-owned houses. The most important one is that within 5 years from the date of selling the house, you need to live in the house for two years, so what kind of two years can you live in? Enjoy full VAT exemption? Consider the following two situations:
1. Situation 1: First live in the house for two years, and then rent it out for three years. In this case, the value-added tax on the sale of the house can be exempted. This is especially suitable for some people who are exhausted from looking for a new home and decoration, and want to rest for a few years before tossing. In addition, the old home can contribute a little more value, and it can be rented out for a period of time. I suggest not to be too greedy, rent for two years, tidy up the house in the last year, find a good day to go on the market, and sell (Close) before the expiration of three years. All value added pockets tax-free.
2. Situation 2: first rent out for two years, then decorate, then live in for two years, and finally sell it on the market. If this is the case, then all value-added tax cannot be reduced or exempted, but the value-added tax in the first two years of renting Part of it is taxed as investment income, that is to say, only 60% of the value-added tax can be pocketed for free, and the other 40% of the value-added needs to pay VAT. The VAT rates for 2018 are as follows: If the couple’s total income is between $77,201 and $479,000, the VAT is 15%, and if the couple’s total income is $479,001 and above, the VAT is 20%.
After everyone has read it, welcome to discuss. Next, I will start talking about investment in rental housing, so stay tuned.