Monday, July 25, 2005

Two Stepping

Dollar Stretcher has a new article about "two stepping," the tax-free capital gain you get from selling your home after two years of residence.

This practice has funded my family's retirement account and propelled us from a marginal neighborhood into a safe, suburban one.

I agree with the author's point that moving every two years, while difficult, is a sure-fire way to pare excess clutter. (One reason I have only a small home library now!)

One thing we are NOT trying to do is keep escalating in neighborhood. Even though the potential returns are greater, the more expensive home includes higher maintenance costs, higher property taxes, and higher real estate commission fees.

Our goal is to keep moving within the affordable level of neighborhoods, investing some profits for retirement and rolling some profit into the next buy. Eventually we will buy a final home with equity alone.

Let's hope so, anyway!

3 comments:

Anonymous said...

I just love your blog, Meredith. Wow! We have been doing this and not even realizing it! hehe Our average stay in a house is 3 years. Our first house we lived in 3 years and sold for a profit of $21,000. Our last house we built and then sold it 3 years later with a $175,000 profit. (the land had been given to us.) 10 months ago, we found a very dated house on 3 acres in a nice subdivision. We invested the profits from our last house and remodeled it (living in an RV and later in the house). The house is now worth over $125,000 more than we purchased it for (but we did put in $70,000 not including labor.) We plan to stay in it exactly 2 years. It isn't easy at times living in a fixerupper -- with 3 children and homeschooling. Now that it is finished I love the house. I enjoy the creativity involved in searching for houses, decorating them. Its a hobby for us and our children are learning along with us, helping with the work and going on drives to scout out houses. I can't wait to show this to my husband! There's a name for crazy people like us!! :)

Jordana said...

I guess I'm too attached to my house and neighborhood. Although we could certainly turn a nice profit on our house if we sold it, we couldn't afford to buy anything else in the same area and this location is ideal for us.

Meredith said...

Wow, anonymous! Your family has made some impressive profits. And, I agree--it makes almost the perfect "home business" for a stay at home mom and kids. Almost every kid can participate at some level.

Jordana, we haven't loved any of our neighborhoods yet. I guess that's why it's so easy to pick up and move on. I think it was the college drug dealer down our first street and the litter of baby pit bulls on our second street. (I put the house on the market a month later.) Since our "dream home" is a more rural setting, I think we'll still be able to afford it for less than comparable city housing. What in the world do people in California buy when they sell their existing homes?