Real Estate: Should Boomers take the profit and run?
Categories: Real Estate News, South Florida Market Stats
hiThe Baby Boomer Generation was projected to be the wealthiest retiring generation in history. But this recession put a damper in the early retirement plans of many, as investments took a dive in the past 2 years. But there are many Boomers who have owned their properties for 10 years or longer who have accumulated a lot of equity and if they sold today would still realize a substantial profit. Should Boomers take advantage of the recovering market and cash-out their profit in their primary homes?
There is no doubt that our Country is in a period of change and President Obama is keeping his word and becoming the President of change. So the question is how long before the capital gains tax rules change? Real estate has been the best investment because it offers many benefits, but the greatest is tax free profit. At least in your primary home a married couple could realize up to $500,000 in profit free of taxes and pay only 15% for profits above that amount. Singles can realize up to $250,000 net profit without paying taxes.
During the rising market of the 1990’s and early 2000’s many people were buying homes, fixing them up and living in them for a couple of years and cashing out. This can be done repeatedly as long as this is your primary home and you lived in the house at least 2 years within a 5 year period — so many property owners took advantage of this tax rule and they made a lot of money.
But with the Recession and cash shortage in government, it won’t be long before that sacred cow is slaughtered. There are talks about increasing capital gains tax to 20-25% and possibly changing the rules that govern real estate investments.
This may be a good time to find out how much equity and profit you have accumulated in your house. With a recovering real estate market, properties that are in great location and in move-in condition are in high demand.
This is also a great time to do those improvements you have been putting off like changing the windows to impact resistant windows (for properties $500K+) or changing those hurricane panels to accordion shutters (for properties under $500K). If the bathroom needs updating and the kitchen new counter tops and appliances this is the time to make those changes and get your house in top shape for the demand that is already building up. Contractors are hungry and you can get good quality and save 15-25% in the improvements.
There is no doubt that this administration is going to change the tax rules and tax structure — the question is when. We may not know when this change is going to happen, but if you have owned your house for 10 years or longer and you have significant equity and profit, it may be a good time to downsize and take that profit before uncle Sam takes it away from you.
If you are one of those Baby Boomers and you want to know how much profit you have in your property contact me or another realtor to request a free Comparative Market Analysis and equity-profit study.
