Saw this link on my FB feed and thought of this thread…
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Great overview article, Colorado_mom! Thanks for sharing!
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I wondered if anyone had looked into prefabricated homes for downsizing?
I’m looking in a high cost of living area and the houses within budget are not that nice. I know there are a lot of factors (cost of land, connecting utilities, etc.) but curious other pros/cons anyone may have run into?
https://comodularhomes.com/gallery/colorado-modular-homes-exterior-photos/
@Jolynne_Smyth I have a friend who is building a modular. She is really happy with the options to customize this home. She purchased the land, and had to have that prepared. Then the foundation. The house will be delivered, and set up once that foundation had cured. Then she has to have all the hookups done, water, gas, electric. Driveway paved too. She will contract with someone to build a nice patio, and front entry stairs etc.
She says…at the end of the day…it’s costing about the same as a stick built home…but it will be brand new, and fully square.
She ordered hers last June…it won’t be ready until the end of April for delivery (and that’s assuming it comes on time…). Then the assembly process begins. So…time wise…actually longer than stick building.
I think modular homes have come a long long way…and we would consider one.
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So someone explain this to me. Or, confirm this to me.
Scenario 1: DH and I buy a house for, let’s say, $550K. We sell for $900K. So, since the capital gains is < $500K, no capital gains tax. We buy another house for $550K. We sell for $850K. So, no capital gains tax?
Scenario 2: DH and I buy a house for, let’s say, $550K. We sell for $900K. So, since the capital gains is < $500K, no capital gains tax. We buy another house for $950K. We sell for $1.4 million. (Profit of $450K.) So, no capital gains tax?
I guess what I’m asking is, is each house purchase/sale episode separate and distinct, or are all purchase/sale episodes over a lifetime combined and evaluated? In the second scenario, above, the profit over time is actually $900K.
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That’s nice to hear, thumper1! I’ve been looking and looking at houses in the area I want to live - some are gorgeous, but if I’m trying to buy something using primarily the profit I might make on the sale of my existing house…not that many nice options. I understand - the area I want to live in is absolutely beautiful and the prices reflect that.
I agree w/you about the bonus of the fresh and new modular vs. an existing house w/potential unexpected concerns.
That raises another point I’ve been thinking about lately - I know many ladies are very handy. My hub is so I have not paid attention to all the plumbing, electric, other house/yard maintenance stuff he’s done over the years (I should have, but didn’t!). When thinking about a ‘stage 2’ house - I’ve also started thinking … what if it ends up being just me at some point? Can I take care of a whole house/yard, etc.? Does anyone else wonder about that as a factor in future planning/downsizing? Or perhaps I am just overthinking and a bit morbid…LOL
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I don’t think you are being morbid - you are being realistic. And smart.
Something I have also thought about is moving away from my current home of 25 years (and area my entire life) with my DH in retirement. I want to make sure it is some place we each would stay if one of us was gone. I feel like I have known of couple who move away and then one passes away and the other one moved back, near their kids, etc. So I think about a community as we start scoping out potential retirement areas.
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Im single. I hire people to do all the home maintenance for me.
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I’ll be morbid and rude … I’ve thought of this and about all the space I’ll have in the garage if dh passes first!
I could handle the yardwork, but I will be SOL on things like technology.
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I have to hire people to fix things. My husband is a handy man and he fixes most things in the house, so far we have not hired anybody to do anything yet. For example he changes filters every year, batteries for the smog detectors, when one goes off, he changes them all, maybe a few years.
I’ve already taken care of the yard but if the sprinkler goes bad, I need to hire somebody.
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@VeryHappy Here’s a good summary from Nerd Wallet. As a relo family for several years, we always had to be careful about the 2 year rule. Our good friends got “nabbed” this year after a 20 month stint. I just did my parents taxes; they moved after 50 years; they do allow for improvement credits to the >$500k such as roof, heating, etc. They put a lot of $ into the house over 50 years, and they’d kept ALL of their receipts 
. They didn’t end up owing anything.
"How do capital gains taxes work on real estate?
It depends on your tax filing status and your home sale price, but you may be eligible for an exclusion. The IRS typically allows you to exclude up to:
$250,000 of capital gains on real estate if you’re single.
$500,000 of capital gains on real estate if you’re married and filing jointly.
For example, if you bought a home 10 years ago for $200,000 and sold it today for $800,000, you’d make $600,000. If you’re married and filing jointly, $500,000 of that gain might not be subject to the capital gains tax (but $100,000 of the gain could be).
» Considering selling? Learn tips for any market
When do you pay capital gains on a home sale?
You pay tax on the whole gain of your home sale if any of these factors are true:
The house wasn’t your principal residence.
You owned the property for less than two years in the five-year period before you sold it.
You didn’t live in the house for at least two years in the five-year period before you sold it. (People who are disabled, and people in the military, Foreign Service or intelligence community can get a break on this part, though; see IRS Publication 523 for details.)
You already claimed the $250,000 or $500,000 exclusion on another home in the two-year period before the sale of this home.
You bought the house through a like-kind exchange (basically swapping one investment property for another, also known as a 1031 exchange) in the past five years.
You are subject to expatriate tax.
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Thanks. So in both of my above scenarios, there’s no capital gains tax. Good.
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Provided you live in each house for 2 years before you sell it
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There is also a 2 out of 5-year rule that allows you to use the exclusion without having to live there 2 years consecutively.
For example:
Your two years of residency and the two years of ownership don’t have to be concurrent. You can live in the home for a year, rent it out for three years, then move back in for 12 months. The IRS figures that if you spent this much time under that roof, the home qualifies as your principal residence.
This works well for people owning and staying at a vacation home part time. It’s all in the timing of the sale.
We have friends in a very high income area who tore down their small house and “built” a pre-fab home on an odd lot. No one would ever know it was pre-fab. Apparently, there are many luxury pre-fab manufacturers. Can work out particularly well if you live in an area with high construction costs and high demand. The pre-fab comes with all the prices built in.
Not sure how the resale is. In a hot market like this, buyers likely won’t care. But they might down the road.
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Before going the manufactured home route, make sure to research local zoning laws and building codes. For example, this applies to my neck of the woods:
(ETA: I have no idea why the word “research” gets linked to some spam page… I can’t do anything about this. Sorry. Don’t click on it!)
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I would be worried about earthquakes with prefab homes. Valid concern?
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Absolutely. The local building codes should address that (bracing to the foundation etc. ).
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We would certainly contemplate potential future widow (or widower) status before moving to another location.
Regarding decisions about staying in current home or “downsizing” (which can be more appropriate to aging but more expensive) in same town, it will likely not be much of a consideration. However, our future ability (and patience) as a couple to deal with yardwork, maintenance, hired repairmen etc would be a factor.
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I would be worried about earthquakes in any home. I’d imagine if you live in an earthquake prone area that you’d need to conform to building codes which must have additions for earthquakes.
In our area, all beach homes are built on stilts (iron foundations). Some are quite high depending on proximity to the water. No one builds on standard foundations near the ocean anymore.
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