I read your article on capital gains on selling a primary residence. I have some questions about the non qualified use of the principal residence?

I stayed with my Mom for 5 months (October 9, 2021 to March 12, 2022) after the death of my step-father. I stayed with her so she wouldn’t be alone after his passing. After the 5 months I went back to my primary residence. During that time she asked me if I would sell my home and come live with her permanently. I thought about it and eventually I did decide to sell my home and moved in with her permanently. Would I count those 5 months toward non qualified use?

In addition, I moved out of my residence 3.6 months prior to to the sale of my home. I moved out all personal items on September 18, 2022. The house was listed for sale on November 6, 2022 and the house closing and sale was on January 9, 2023. During that time I was still maintaining the home but was no longer living there. I did a change of address 3 weeks (24 days) before closing on the property and changed my driver’s license address approximately 2 weeks after selling the home. Would moving out of the residence prior to the sale of my home count as non qualified use?

The total time away from the home during the last 5 years was approximately 8.8 months which occurred during the last year of owning the home. I did take 1 week vacations here and there as well.

Would being away from the home that long have any impact on my exclusion deduction amount especially during the last year of owning the home? I did not buy another property prior to the sale of my home, This is the only home I’ve ever owned or sold.

I have owned the home since May 23, 2003 and sold on January 9, 2023.

Kind Regards
Cassandra

Thanks for the kind comment Don! Glad you found the Medicare episode so informative. I don’t have an episode on disclaimer trusts but I’ll keep it in mind for a potential future episode!

I have also recently listened to multiple episodes on estate planning. My wife and I have disclaimer trusts accounted for in our wills. I know that I need a better understanding of disclaimer trusts, and I didn’t hear anything in the podcasts on these. Is there a podcast I may have missed that discusses disclaimer trusts?

Thank you, and keep up the great work!
Don

Hey Phil, w/r/t real estate, taking on debt to invest in rental properties isn’t risky if analyzed and structured thoughtfully. I worry zero at night about my real estate debt bc I analyzed the scenarios pretty thoroughly and factored that into my underwriting assumptions. I’m not saying real estate is for everyone (it can be a real PITA sometimes), but it works for some.

The reason “why real estate” as a key *passive* diversified income stream is because it cash flows well, if acquired correctly. In the most ideal case, it cash flows well enough to cover all your living expenses, so you never have to touch any underlying principal, either from your real estate portfolio or your securities portfolio.

Real estate has some risk, as does any investment, which is why there is no shortcut around putting in the time/energy to due diligence an opportunity before writing a check against it. If your net worth is med/high, I don’t think the issue will be obstacle to entry – it’ll be finding and acquiring good deals.

If you have sufficient means to put together a securities portfolio of zero-risk bonds (which is what 100% means) that will get your through 30 yrs retirement, then that’ll certainly be less (in fact, zero) hassle. It depends on what you need / are content with in retirement in terms of annual spend.

Single biggest challenge these days is portfolio diversification across investments with low correlation, some amount of yield, and low correlation. I carry a bit more cash than I’d like but real estate is a bit intimidating given the interest rate risk. DC home prices are where they were in 2008 and I don’t trust folks’ ability to repay debt…we are likely heading for another correction soon. I tried Lending Club recently and after 3+ yrs, the yield was no more than a certificate at my local credit union. Their underwriting standards for A and B loans are horrific causing significant write-offs that would’ve made this investment superior to bank CDs. It’s too bad that even 750+ credit score debtors default with an alarming rate as they do…either that or Lending Club is profiting off other people’s capital. Never again Lending Club!

Understand your preference is real estate towards the creation of multiple revenue streams. Curious what your liabilities are relative to that passive income. What are the risks that keep you up at night? Does real estate obstacles to entry too risky for med-high net worth folks like me? I mean, I can put together a portfolio that has a ~100% of getting me through 30 yrs of retirement with a modest annual income. Why should someone risk that by leveraging debt for income at the risk of catastrophe?

Thanks.

Glad you’re getting value from the podcast!

Thanks Steve!