Denver Real Estate Rents Have Peaked
Being in the Denver Real Estate Market on a daily basis gives me a bit of a unique opportunity to report to you. According to a reliable source last year at this time there were 17 homes for rent in Highlands Ranch. This year over 70 are for rent. The rent prices above $2000 per month are primarily responsible for this increase. And while sale prices have gone up some neighborhoods simply have not kept pace with all of Denver. Two bedroom condominiums are especially in demand to buy and those prices continue to accelerate while higher end homes can be seen to languish. The important bit on this may be when you put your rental “into service” and then when you sell it for capital gains tax purposes. If your Denver area rental fits below, you may wish to sell it sooner than you thought. READ ON!
In the last few years, some people who were unable to sell their homes, rented them instead. The market has improved in most places and the home may easily sell now and possibly, for a higher price.
Even though the opportunity to sell in the near future might not change, there could be another opportunity that could quickly disappear for some homeowners.
Most homeowners are aware that there is a capital gain exclusion on the profits of a principal residence of up to $250,000 for single taxpayers and $500,000 for married taxpayers filing jointly. The rule requires that you must own and use the home as your principal residence for two out of the last five years.
A homeowner can rent their home for up to three years and still be eligible for the exclusion. As an example, if they had owned and lived in it for two years and then rented it for two and a half years, they would need to sell and close the transaction before the remaining six months expired.
If there was a $200,000 profit in the home that didn’t qualify for the exclusion, a 15% long-term capital gain tax of $30,000 could become due depending on the tax bracket of the owner. With some careful planning, the tax could be avoided. Awareness of the time frames and the right team of tax and real estate professionals could save a considerable amount of the homeowner’s equity.
Should you sell your rental home NOW? Only a complete evaluation of price will tell you. Call Pete at 303-880-5585 ext 3 Today.