Post Eagle Newspaper


Dec 7, 2023

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Time Now


Ready To Move, But Not To Sell

As the real estate market slowly begins to turn the corner, many prospective sellers face the question of whether to accept today’s lower prices or hold out for a more robust market. And many are weighing the pros and cons of turning their home into rental property as they wait out the recovery.

Whether moving for a job opportunity, to upsize, downsize or retire to a more pleasing climate, homeowners who are ready to move face a challenging real estate market. Many who bought at the top of the market must deal with the specter of owing more than their home is now worth, while others may find today’s deflated prices unacceptable and sense the market is poised for an upswing. Those who have already moved on to a new home prior to selling may face the prospect of carrying their previous home and all of its costs indefinitely.

Given this changing real estate dynamic, many homeowners are weighing the pros and cons of renting rather than selling their properties. But the decision to sell or rent is not simple and should include an examination of tax considerations and cash flow issues, as well as personal and financial expectations.

The Accidental Landlord

Homeowners who choose to rent out their homes rather than sell, or are pressed into it out of necessity, join the ranks of what some call “accidental landlords.” Many homeowners squeezed by the collapse of the real estate market have found that postponing the sale of a previous home by turning it into rental property can very quickly eliminate an array of problems, such as:

•            The possibility of selling at a loss.

•            Having a property languish on the market indefinitely.

•            Cash flow issues that may arise if two mortgages are involved.

•            The stress of anxiously waiting for an offer.


Additionally, landlord status may also offer:

•            Tax advantages including deduction of mortgage interest and real estate taxes as well as expenses and depreciation that can offset rental income, depending on your particular situation.

•            The ability to continue to build equity if a mortgage is involved.

•            Time to wait out the market until prices rebound and sales improve.


Waiting Has Its Drawbacks

While becoming a landlord may solve a host of problems, there are some serious issues–both financial and personal that should be carefully considered such as:

•            Losing the capital gains tax exclusion. Married couples filing jointly qualify for a $500,000 capital gains exclusion on their primary residence, as long as they live in the house for two of the previous five years. If the rental period lasts for more than three years, this tax benefit may be forfeited.1

•            Depreciation will become taxable. If the capital gains tax exclusion is claimed following the property sale, any depreciation used to offset taxes on rental income will become taxable, thereby reducing the exclusion amount.

•            Potential problems with tenants. Landlords often find themselves dealing with damage to property, legal issues or failure to pay issues that can result in a lengthy and expensive eviction process.

•            Lack of diversification. Carrying two homes may result in an overall financial portfolio that is significantly overweight in real estate. Assets tied up in a former residence that is converted into rental property may be more wisely redirected into investments with a potentially higher rate of return.


Additionally, potential landlords should seriously consider the following questions:

•            Is a potential appreciation rate of 3% to 5% per year over the next three years meaningful enough to make renting a viable option?

•            Is the rental market strong enough to allow for a rent that will cover all carrying costs?

Reaching a decision on whether to sell or rent should be the result of a thorough examination of financial, tax and personal considerations. The advice of a real estate professional as well as a trusted financial advisor can help you reach the right decision for your particular situation. Please contact me if you would like to explore the pros and cons in greater detail.


Sources: 1 IRS, Publication 523, “Excluding the Gain,” p. 10, 2013. (

If you’d like to learn more, please contact Irene F. Stolarz.

Article by McGraw Hill and provided courtesy of Morgan Stanley Financial Advisor.

The author(s) are not employees of Morgan Stanley Smith Barney LLC (“Morgan Stanley”). The opinions expressed by the authors are solely their own and do not necessarily reflect those of Morgan Stanley.  The information and data in the article or publication has been obtained from sources outside of Morgan Stanley and Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of information or data from sources outside of Morgan Stanley. Neither the information provided nor any opinion expressed constitutes a solicitation by Morgan Stanley with respect to the purchase or sale of any security, investment, strategy or product that may be mentioned.

Morgan Stanley, its affiliates and Morgan Stanley Financial Advisors do not provide tax or legal advice. This material was not intended or written to be used, and it cannot be used, for the purpose of avoiding tax penalties that may be imposed on the taxpayer. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning and other legal matters.”

Morgan Stanley Financial Advisor(s) engaged The Post Eagle to feature this article.

Ms. Stolarz may only transact business in states where she is registered or excluded or exempted from registration Transacting business, follow-up and individualized responses involving either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made to persons in states where Ms. Stolarz is not registered or excluded or exempt from registration.

Investments and services offered through Morgan Stanley Smith Barney LLC, member SIPC.             CRC 634529 [03/13]

Courtesy of: Irene F. Stolarz, Family Wealth Director, First Vice President
Branch Name: Morgan Stanley, Little Falls, NJ
Phone Number: 973-890-3020
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