Thursday, January 13, 2005

Turning Your Home Into a Gold Mine

As anyone who spends much time in the military can confirm, the life involves many moves and separations from family. In my case there were thirteen station changes in a total of 21 years. Two of the moves were to locations with required stays of one year, where dependents could not go along, so there were family separations as well. For the moves where the family could go along a decision had to be made as to where to live. The options were normally between living in base housing or living off base in a rental or purchased property. Living in base housing was easiest but oftentimes there was a waiting list. In our case , my wife and I liked living off base and as it turned out we always did so except on one occasion, that being our 6 months in San Antonio while I attended Officers Candidate School. In all of our other moves we would take the money from the sale of our previous house and plow it back in to one at the new duty station.

Sometimes we would have to swing a bridge loan pending sale of the house we left behind but usually the market was pretty good around military bases and sales were usually wrapped up pretty quickly after placing a house on the market.

The thing we most liked about living away from the base was the extra bit of freedom we enjoyed. Fewer rules and regulations and not in the least, the profit which developed over time from the re-sales as we learned how to make improvements both cosmetically and structurally. I don't remember just when and where I came by the skills to do the fix-ups. I certainly was not gifted in this regard nor did I come from a background of this type of activity. Necessity became the mother of invention. I remember our house in Holyoke outside Westover AFB. We wanted to finish the basement which was bare poured concrete. With some help of friends, I learned to partition walls, run electrical wiring, install plumbing lines and fixtures and hang drywall. Where others enjoyed sports events or golfing on weekends I enjoyed doing fix-up projects.

After leaving the military in 1972 I continued on along these lines, thoroughly enjoying my "retirement" and devoting my full time to what had been a hobby. I took on many home improvement projects in Belleville, Il and all along I was still learning to do the things that most mattered to make a home more valuable. Which brings me to the point of this article.

We've all witnessed how the prices of homes are spiraling upward and how enterprising folks are taking advantage of this. The government has a big hand in this whole phenomenon because of two things they have done. First, interest rates have been held artificially low for some time making it easier for people to sell and buyers to buy because of the prevailing low interest rates. Secondly, the income tax rule allowing capital gains to become tax free to sellers (up to a very generous limit of $500,000.00 for a married couple) who have occupied a home as their principal residence for the past two years. As long as this duo of benefits continues and as long as our economy stays relatively strong, we can expect this upward movement of prices to continue.

I would encourage every young person today to own a home at the earliest possible opportunity. Owning, as opposed to renting, is a sure-fire way to start moving up the ladder to create a storehouse of value for the future. As equity builds in a home, the equity can be tapped for other needs or projects.

Some enterprising people who enjoy doing fix-ups are making a lot more than pocket change by buying a well located residence every two years, putting all the fix ups in place while living in it and selling at a tax free profit after the holding period has been reached.

Where else in today's world can such profits be made without tax liability, over and over again?


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