I’ve known a few people who own a second home as an investment in a high cost of living area. For them, it is just another way to invest that doesn’t involve the stock market.
The returns can be a little lower, but you don’t have to pay capital gains when you sell your primary residence. So, the no-tax financial move is to move into the rental when you want to downsize or leave and sell the primary residence. Then, you either live in your downsized and paid off rental as your residence or you wait two years and sell that residence as your new primary residence to get out of paying capital gains on your rental.
Another phenomenon I’ve heard is buying a house and renting it until a kid comes of age to move into it, to give them a fair shot at reasonable housing in a market that just goes mad.
Another facet of “renting” to your kid is that if they get divorced, the inlaw has no claim to the house, so it won’t get caught up on dividing the property. So it can be a subtle way of protecting your kid’s living arrangement without being overtly skeptical of the relationship.
I’ve known a few people who own a second home as an investment in a high cost of living area. For them, it is just another way to invest that doesn’t involve the stock market.
The returns can be a little lower, but you don’t have to pay capital gains when you sell your primary residence. So, the no-tax financial move is to move into the rental when you want to downsize or leave and sell the primary residence. Then, you either live in your downsized and paid off rental as your residence or you wait two years and sell that residence as your new primary residence to get out of paying capital gains on your rental.
Another phenomenon I’ve heard is buying a house and renting it until a kid comes of age to move into it, to give them a fair shot at reasonable housing in a market that just goes mad.
I know someone renting a second house to their kid. I don’t know the full arraignments of what is going on with that, though.
Another facet of “renting” to your kid is that if they get divorced, the inlaw has no claim to the house, so it won’t get caught up on dividing the property. So it can be a subtle way of protecting your kid’s living arrangement without being overtly skeptical of the relationship.