converting principal residence to investment

Dear Mr. Hickox,  I have owned and lived in the same condo for 20 years.  It has gone up in value from $40K to $180K in that time.  Because the market is not that great right now, I plan to convert this property to a rental when I move into my new home.  What do you think.

 

Dear C:    Right now, because it is your principal residence, you qualify for up to a $250K income tax exemption upon sale of a principal residence.  When you convert this property to rental property you start to lose the exemption.  If you sell the condo more than three years after you convert it to rental then you have lost your principal residence  tax exemption.  Given our discussion about rates of return and in light of this tax exemption available to you, I urge you to sell this condo not later than three years from the date you convert it to investment.  Sincerely,

Steve Hickox
Attorney / President

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