One of my clients asked a really great question and that question was, "How long should I live in a home before selling it?" I wanted to take a second to answer that question because I think it's a super important question that a lot of people wonder about, and I also think that my answer is a little bit different or perhaps perceived as controversial from the conventional wisdom that is often given. So the conventional wisdom says that you should probably live in a property for anywhere from five to seven years, but there's really no understanding of why that five to seven years came about. So I think when you understand the why, you realize that five to seven years isn't as important as the circumstances that might allow you to perhaps move from the current property or home that you're in.

There are two factors that go into answering that question. The first is your equity position. It's basically whether or not you have enough equity in your home to afford the moving costs, get your down payment back, and ideally some of that money that you would've used towards the principal balance of your property. If you don't have at least that amount of money as an equity position, you probably don't want to move. The reason I say five to seven years may not be the answer is that over the last couple years, we've seen house values just skyrocket, and as a result, that's allowed people to build up really strong equity positions that it's actually been possible to afford and be okay financially to move within a year, two years or even three years, which is far less than the recommended five to seven. So I think the first answer is just it boils down to your equity position.

The second factor is that you want to look at taxes. The profit gained from the sale of a property is going to be taxed at what's called capital gains. But there is a capital gains exclusion rule, which just simply states that if you live in the property for two of the last five years, then you're exempt from paying taxes on that. So at a minimum, I typically recommend you should probably live in a property or a home at least two years, but there's no rule that says you should live in at least five to seven years. I think it boils down to your equity position. If you're buying at the top of the market and how house values come crashing down, it may be better to stay in that house for 15 years. If you're buying at really low and the house values are increasing, you may be able to sell in two years.

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I think, how long you should live in a home really boils down to your circumstances, and you should really look at your whole financial picture rather than just taking the recommended advice of five to seven years. However, I also know that life is more than money and that also needs to be taken into account because you should be living a rich life and how you define that. So if that means taking a little bit of a loss on a home to move closer to work or move closer to family or some other thing that is important to you, those should also be factors that are taken into consideration because life is more than just money. Thanks.

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