Asked by ellensens723  |  Submitted December 10, 2016

I own a home out of town that I rarely use. Should I sell it or keep it? Which is better from an investment & tax standpoint?

I only use the home when I'm in the city for appointments. Otherwise it sits empty.

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  Answers  |  3

December 12, 2016

If you do not use the house or rent it out there is an opportunity cost, which represents the fair market value (FMV) of the home. If you sold the home, you would have money to invest. It would probably pay to rent a hotel when you are in town. On the other hand, you could convert it to an investment property, take depreciation and rent it it out. You'll have to crunch the numbers to weigh up these options.

$commenter.renderDisplayableName() | 09.19.19 @ 05:03

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December 14, 2016

Ellen,

To reach an informed decision as to which option is best for you, there are several factors you must consider, including:

1. What is your basis (cost) for the home and do you have a gain or loss?
2. What are the expenses of maintaining the property and is current cash flow to cover the expenses an issue for you?
3. Is it possible for you to rent the home when you are not using it?
4. Are you concerned with a long-term stream of income or upfront capital to invest.
5. Has the value of the home gone up in recent years? Are projections for it to go up or down?
- You ask which is "better" from an investment stand-point. On a very superficial level, consider whether an appreciation of the house of 20% per year for the past 10 years is "better" than the return on the stock market, and whether the expectation is for property values in your location to increase.

6. What will you do with the proceeds from the sale of the house?
There are specific requirements for classification and tax treatment as a rental property permitting the deduction of related expenses, and a different tax impact depending on how, when and for what purpose your acquired the home upon sale.

If you would like guidance in valuing and considering these and other issues to make an informed decision, please contact us for a complimentary consultation.

$commenter.renderDisplayableName() | 09.19.19 @ 05:03

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December 14, 2016

It would be best to ask your CPA / accountant these specific questions. You might consider turning the property into a rental property so it generates income for you and for the seldom times you are in town for appointments, consider a hotel/motel / Airbnb etc.

$commenter.renderDisplayableName() | 09.19.19 @ 05:03

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