By, Lisa Roberts
Let's say you've bought your starter home. You might wonder how long will it take for its price to appreciate so you can sell it and profit. Now, since you're reading this text - that could be pretty possible. Also, you might've seen some signs that it's time to move on. It's not like we read minds, but many folks ask themselves the same old question: How long should you live in a house before selling? If you're interested in finding out the answer, stick around!
Why should you wait?
The thing is: you want to wait a while before you sell your home. Selling (or purchasing) a home is one of the most important financial transactions your average US citizens experience in their lifetime. It's the biggest one, no doubt about it. That being said, the whole process should be carefully thought out. It's safe to assume you'll want to maximize your chances of gaining profit from the sale and minimize the potential costs. It's only natural. In the text below, we'll elaborate on this further.
A home sale (or purchase) is probably the biggest financial transaction average US citizens experience in their lifetime. It should be carefully thought out.
Real estate trends
You don't have to be a professional to know that the real estate market has its ups and downs. These fluctuations usually follow an 18-year pattern. Having an insight into conditions in your area's real estate market is, of course, an advantage. Hiring a realtor to give you an approximation might be the thing to do. Of course, if you don't have any agents amongst your friends or relatives. Professionals are always the best option when it comes to handling real estate issues. Anyway, let's give you an example of how a person can benefit from paying attention to market trends.
Learn from others
Imagine this situation. Person X bought a home at the start of the 2008-13 recession. You can probably remember how housing prices suddenly dropped 30-50% percent. It's safe to say Person X saw an excellent opportunity or just got lucky. When the market started healing as of 2014, Person X began thinking about selling the house. And eventually, it happened. Our hero, Person X, greatly profited from this transaction. In conclusion: it's essential to stay informed about real estate market trends because they'll undoubtedly affect the time you need to wait before selling your place.
Avoiding the famous capital gains tax
We're not suggesting you do something illegal here. Why would we? It's completely legal to avoid paying capital gains tax. But, things are not that simple.
So, how long should you live in a house before selling? To avoid paying capital gains tax on the profit you gain, you need to live two out of the past five years in it. The house you're planning to sell needs to be listed as your primary residence. The bottom line is: wait at least two years before you sell your home. This might be the most crucial tip we'll give you today.
Avoid paying the capital gains tax by living in the house you're planning to sell for at least two of the past five years.
Additional financial tip: Cut costs wherever you can
This will be a quick digression (if it even is one). Since you want to cut costs wherever you can, have in mind moving to a new home won't be a cheap ordeal. Let's say you've sold your home and profited. You want to avoid paying unwanted moving expenses. In other words: paying extra should be avoided by all means. Picking out a trustworthy moving company is one of the solutions you'll need to consider.
When's the last time your home was renovated?
If your home was in premium condition when you bought it, you might have a hard time earning a profit on the sale. In other words: it's tough to build equity on home repairs and renovations if the place was already in mint condition when you bought it. However, if you've done some repairs and additions here and there, you might gain something from them. You might want to wait until your home is in perfect condition. There are a lot of house jobs you can do to significantly increase your home's curb appeal.
Another word of advice
What's the best time of the year to sell your place? The guys at simplemoving.us tell us it's summer. We talked about curb appeal in the paragraph above. Your home can look astonishing during early or late summer. Think about that. If you have the opportunity, postpone putting your house on the market until summer.
Mortgage and equity
Oh, we spoke about equity and forgot to mention this one. You can start building equity once you've paid the principal of the mortgage for your home. If you've opted for a modest house and paid a larger down payment, then you're good. During the first few years, you'll be paying more mortgage interest than principal. That's why selling your home in under five years isn't recommended as much.
Paying off the principal of your mortgage is the first step towards building home equity.
Alt-tag: Scrabble letters merged to form MORTGAGE.
These were some of the tips concerning the question of how long should you live in a house before selling. Let's do a quick walkthrough. Wait at least two years before you sell your place. That way, you'll be excluded from paying the capital gains tax. Let that be the bare minimum. Also, paying off your mortgage principal is the first step towards building equity. You might want to wait until you've paid the sum. Home renovations and repairs can significantly increase your home's equity. Make sure you wait until everything is in top condition. Finally, don't forget to cut unexpected costs of the whole ordeal wherever you can. We're sure you'll succeed in getting the best price for your home by sticking to the tips we've mentioned above.