Selling or renting a home in California is a huge decision due to the very high property values and equally high property taxes. You could be faced with a sale or rent decision if you are looking after elderly parents who can no longer stay in their homes. In other words, do you sell their home to pay for assisted living or nursing care or do you rent their house out to help defray the cost of their new living situation?
Bay Area Real Estate
As I have said in other posts, we live in the San Francisco Bay area, one of the most expensive places to live in the country. But back in 1961, things were much more sleepy and agricultural. 1961, the year my in-laws bought their house and really had to stretch to buy a house and start a medical practice at the same time. But things went well for them and the house value has risen 5000%. Can you say huge tax bite if they sell?
Also, here in California, we have a property tax situation known as Proposition 13. Proposition 13 limits property tax increases for long-term residents to ensure they wouldn’t get taxed out of their homes as they got older. The result for many seniors, who have been in their homes for a long time, is that their home has low property taxes and is paid off. As a result, they can rent out their home for a considerable profit.
To Sell or Rent
People are always asking us if we are going to sell the house. If we did, the folks would have to pay income tax on that 5000% gain and no one wants to do that. Instead, we are renting the house, using the income to help pay for the assisted living facility that they are now renting for themselves.
In addition, I am doing a smallish remodel on the house to update it and make it more rental friendly (durable). We are paying for the remodel with the proceeds from their estate sale. It was easy to find a property manager, and we’ve found a nice family to rent the house.
What have you done with a loved one’s home once they are no longer able to live in it?