1. He’s had it rented since 2000. That means he doesn’t qualify for the capital gains exemption.
2. His current price structure is based on the prior market bottom. He will not see that price again.
3. Having had it rented for the six years, that depreciation he’s been claiming will come back as taxable capital gain.
4. His selling costs will be 5-6% minimum.
By selling, he’ll realize a 25%-30% drop due to the sales cost and tax hit on capital gains and a lowering of his basis cost. Add that to fact that since it’s a rental, it probably isn’t “prime” condition and that housing market is already 10% or so off peak and basically, if he sells now, takes the tax hit, he might be able to get back in for what he netted if the market collapses 40%-50%.
