Buy a Cheap Home
(An excerpt from 69
Ways To Make Money In Real Estate)
By Steve Gillman - 2005
Selling your home and buying a cheap home instead can sometimes
be a good way to make a profit. The tax law lets you do this
repeatedly. What is the downside of this strategy? You have to
move a lot.
The idea here is simple. You sell your house, and move into
one that costs less. You get to pocket the difference without
paying taxes on the gain, thanks to the tax law that lets you
take an exemption on the capital gains from the sale of your
home.
There are three basic ways to do this.
1. Downsizing for Retirement
Maybe you don't need a big house any longer. The kids are
on their own, and you are tired of cleaning 3,000 square feet
of space. Fortunately, you have paid off the mortgage loan, so
when you sell for $355,000 and buy that cute little house nearby
for $220,000, you get a nice chunk of cash to play with.
2. Moving to a Cheaper Town
Perhaps you are retired, or you just have a business or profession
that can be pursued anywhere (like this internet business that
lets us live in the mountains of Colorado). If you don't have
any other big reasons to stay in the city you are in, you have
an opportunity. A house just like yours can be bought for half
the price somewhere else.
In 2002 we paid just $17,500 for a two bedroom home in a beautiful
mountain town in Montana. It had hardwood floors and a full basement,
and it would have cost five times that much an hour away in Missoula.
We have moved a few times since then, but even the house we are
in now would be twice as much in Tucson, Arizona, where we last
lived.
The point is that there are great differences in prices of
homes around the country. Sometimes the low priced homes are
in areas where you wouldn't want to live. But often they are
in great little towns and big cities that you might love to live
in. It is easy to research all of this on the internet now, starting
with our own web site, HousesUnderFiftyThousand.com. (That's
me, my wife and my mother and father on the porch of our Montana
home).
Find a town you love and buy a house for $60,000 less than
you sell your current home for. That's a $60,000 profit for all
practical purposes. You might even live in a nicer home and a
nicer town.
3. Moving With the Real Estate Booms
You could use this strategy repeatedly, if you do your homework.
Buy in an area just before a real estate boom, then after your
home goes up in value, sell it for a tax-free profit. The tax
code allows you to do this every two years. Before selling you
find the next town that is about to boom, and start shopping
for a cheap home there. Do this six times in your life and you
might build up a nice little nest egg.
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