the "5 year rule" for homeowners???? is this true?

Question

I bought a house last year in ohio, in a very desirable area (historic district). It's a waterfront home with an awesome view of the river. Since the market was so bad I got a great price for it, plus it didn't have much curb appeal and wasn't as kept up as nice as it could be. Unfortunately I love the house (and view!) but I absolutely hate living in ohio, and really want to move back to the east coast. I made a lot of improvements (landscaping, new flooring, blinds, etc) and the house looks really good, but I'm still nervous to try and sell it next summer. Is the real estate market projected to improve next year? I have heard of this 5 year rule, where you have to live in a home for at least five years if you hope to make a profit when selling, or at least to cut even. I do not want to live here several more years! I'm thinking I could hold on to the house for another year and rent something on the east coast, and try to sell the house when the market improves. Any advice?

Answer 1

considering you made alot of improvements to the home, you should make out with a decent profit when you sell it. try listing it for what you think it is worth, and make sure you will not accept an offer for anything less than what you paid for it and put into the work, that way you will at least break even. you could always have it apraised to see how much it is worth, and go from there. good luck i hope it works out for you!

Answer 2

There's no "rule" that you must own it for any specific length of time to sell at a profit. Some folks make a killing even in a down market if conditions are right.

However, there ARE potential tax issues that you need to consider. If you sell the home in one year or less, the gain is fully taxable as ordinary income. If you hold it for more than one year, it's taxed as a long-term capital gain, usually at 15% unless your tax bracket it 15% or less where the CG rate would be 5%.

If you live in the home as your principal residence for 2 of the 5 years immediately prior to the sale you qualify to exclude all or part of the gain from ANY taxes whatsoever. The exclusion amount is $250,000 if your filing status is Single and $500,000 if your filing status is Married Filing Jointly.

You may also qualify for a pro-rata portion of the exclusion if you sell with less than 2 years in the home if the reason for the sale is a job change or certain catastrophic events.

If you've been there for nearly a year and can stick it out for another year then you won't have to worry about any taxes on the gain on the sale.

Any decent real estate agent should be able to provide a comparative analysis of recent sales in your area to estimate what your home might sell for now. Whether prices will go up or down in the next year is anyone's guess but a local Realtor may be more in tune with local conditions and be able to make an educated guess on that.

Answer 3

The reason for the 5 year rule of thumb is the cost of buying and selling might add up to 10% of the cost of a home so if you aren't planning to stay long term you are better off renting.
In times of slow appreciation or negative you might live there 10 years to break even or in high appreciation times make a great profit in a single year.
You are doing what is considered flipping, buy cheap, improve and sell. The profit or loss will depend on appreciation and the cost and value of improvements.

Answer 4

That is actually not true...if you made improvements to the home, you should be able to come out on top...depending on YOUR purchase price and all...sometimes, the smallest details make a huge improvement and can make such a big difference! Good luck to you!!!

Answer 5

I'm in Ohio,Let's see what has happened in your area since you bought your house.

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