Sale of one unit of a two unit multifamily home

I currently live in one unit of a two family home, and rent out the other unit. In ESPlanner Plus, I represent this by splitting certain costs and the purchase price between the primary home tab and the real estate tab, which seems to work well. I want to model the impact of selling the unit which is my primary home (after converting the house to two condos) and moving into the unit we've been renting, so that the former rental unit will be our new primary home. The program does not seem to anticipate that a current rental unit could become a new primary home. How should I represent this?

Comments

dan royer's picture

Right. Does it help to flip it around and model the rental as your current primary and the current primary as the rental and then just sell the rental? I'd have to think this through a bit more. Are their mortgages on both?

I didn't think that would work because of the capital gains that could be excluded on sale of my primary residence, but not sale of the rental unit. There are no mortgages on either.

dan royer's picture

This one is complicated and I asked Larry. Here's his reply:

Hi Dan,

1) Have him sell, at zero transactions, at price H the current rental unit at date X.

2) Have him sell his current unit at price Z in which he now lives at date X and buy the current rental unit for the same price, H, he sells it at in 1). I.e., specify a change in homes.

3) Have him buy real estate the two condos at cost Z at date X and specify if he's going to take out a mortgage.

The sale of his current rental (his current real estate) cancels with his purchase of a new residence.

The sale of his current unit in which he lives cancels with the purchase of the new real estate.

best, Larry

Hi,
In step 1), what is meant by "at zero transactions"?
I don't understand what is meant by step 3. Is it just a comment that I have to specify a mortgage in step 2, or is it an additional step. If the latter, it doesn't make sense to me, I'd then own 3 condos.

dan royer's picture

I believe he means to go to assumptions and indicate that the real estate commission is 0% instead of the default 6%.

You can call or write him which might be quickest.

kotlikoff@gmail.com
cell 617 834-2148

OK, thank you.