How Long Should You Live In Your House Before Selling It In Houston
If you sell your home too soon, you might not have any or only a little equity in it. In fact, there’s also the possibility of you ending up upside down in case you overpaid for the property or the market turns the other way. Here is what you need to know about how long you should keep your home before selling it in order to avoid getting into a bad situation. Partner with an experienced, local and qualified real estate agent to get advice on the right time for selling your home.
People sell their houses for a variety of reasons.
Some people have a 5-year plan wherein they buy a house, live in that house until it becomes too small for them, and then they start looking for bigger and better houses. There are also those who buy houses, fix them and sell the house immediately as part of their retirement plan. Many others have to sell their house for unexpected reasons.
Whatever the reason for you to sell your house, you should know that there exists an ideal length of time to live in the house before selling it in order to maximize your gains. Whether you are buying a house for the first time or you are a seasoned homeowner having owned a number of homes for decades, you can definitely use some advice on building home equity before buying that new house.
Get in touch with an experienced, knowledgeable and reliable listing agent to find more about the right time to sell your home.
Minimizing Capital Gains Taxes
When it comes to avoiding capital gains taxes, most people prefer to discuss such things on gimmicky sites or behind closed doors. The fact is that you need to live in your house for a period of at least 2 of the last 5 years in order to avoid paying any capital gains taxes on that house. Many people use this rule to their ultimate benefit.
Professional flippers will find a home that is undervalued. They will live in it and fix it. They will spend some money on updating the kitchen, on tearing down walls for the opening the main floor and on relaying the carpet. They are never in a hurry. Also, they have some money to work with due to having instant equity in the house.
Once two years are over, they will sell the house. This allows them to make decent money without paying any capital gains taxes and they also have the money to move into the next house.
Reasons For Keeping Your Home
Saving money on taxes is definitely a good reason but there are also other advantages of keeping your house for a period longer than a few years even when it’s a starter home. The housing market is one of the reasons.
In order to earn a good return on your investment, you need to time the purchase and sale of your home perfectly. However, the chances of it happening are low as most people end up buying their house when the housing market is almost midway up to the peak.
If you may behave like the general public, and you buy your house when the housing market is already midway up, you’ll find that the real estate market has started declining after two years. You won’t want to list your home for sale at that time as you won’t be making much money. On the one hand, if you keep a watch on the market for peaks and valleys, you’ll find that it’s possible to choose the right time for buying and selling. The general estimate is that the market turns around almost every 7 years.
In other words, if you want to get a greater return on your investment, 7 years is the time you should stay in the house.
Mortgage Payment – Effect on Equity
Your mortgage payment will also come into effect when you are planning to sell your house. Whether you are planning to buy or sell your house, it is important to keep a close look at the mortgage interest rates as well as whether you are in a buyer’s market or a seller’s market. If the timing is right, you should be able to get a favorable mortgage rate with a low monthly payment.
Keep in mind that when you own your house, you will only be paying off the interest for the first few years and not the principal. You want to have as much equity in your home as possible when it’s time to sell your home. In simple terms, it means that you would want to pay off as much mortgage as possible.
In case you have a subpar credit score and that has led to a higher interest rate for you, it’s recommended to pay a little extra towards the mortgage each month in order to make sure that you are able to build some equity in your house. It is also important to pay attention to the closing costs. When you sell the existing house and buy another house, you incur a lot of money in closing costs.
In many cases, closing costs account for anywhere from 2 to 5% of the buying price. Simply put, if you’re buying a house that is worth $ 250,000, you might end up paying anywhere from $5000 – $12,500 towards closing costs.
In case you have bought a house and lived in it for a short time, and you end up building equity worth $10,000 in it, the amount of equity is almost equal to the amount you might end up paying only in closing costs.
Number Of Years You Should Live In A House Before Selling It
Simply put, if you want to avoid capital gains taxes on your home, you need to live in the home for a period of at least 2 years. In case you want to build some equity in your home without any major updates, it’s recommended to live in it for a period of 5 to 7 years.
The numbers mentioned above are a good benchmark but you need to keep an eye on the real estate market in your location in order to make the most money by selling at the right time. Needless to say, do not forget to account for the money that you have already paid towards the house.
Calculate the amount of money you have paid towards the mortgage and the money you have paid on down payment and in closing costs. After all, you don’t want to be right back at the start or you don’t want to just break even when you’re buying a new home.
Haan Homes buys houses in Houston as a way of helping people that don’t want to sell the conventional way. We believe having the option to sell a home fast allows people to spend their time doing what they want to do. It’s all about helping people. Contact us or call us today for more information!