I Broke This Cardinal Rule of Real Estate, But It Turned Out Alright

When you buy a home, there are a few rules of thumb you'll generally hear about. One of the most important is that you shouldn't purchase a property if you don't plan to stay in it for a while. Specifically, it's usually recommended that you remain in the home for more than two years before selling it.

I did not do that. I just sold a home that I had owned for only 18 months. There were some good reasons why I did that, and I was lucky that it turned out fine. But it only worked out for me because of some very specific circumstances.

Here's why I broke this important rule

I ended up having to sell my house after just 18 months because my family decided we were not happy in the home.

It was meant to be a place that we lived in temporarily for about three to five years until we were able to move forward with building a house a few minutes away. But we ended up hating the area due to an extreme, excessive amount of traffic at all times. Plus, when we had a second kid, it turned out that the house was way too small for us to live in even temporarily.

We found a different area that we really loved, which we wanted to move to and we were going to wait it out for two years. Unfortunately, the homeowners association dues were scheduled to go up on the home soon and we were afraid that would make it more difficult to find a buyer, so we decided to sell ASAP even though it had been less than two years since we bought.

Here's why it turned out OK

There are a few key reasons why you're usually supposed to stay put for at least two years before selling. The first issue is that you often won't make your money back if you don't do that, since there are a lot of transaction costs associated with a home sale. The second issue is that if you do make a profit, you'll end up having to pay short-term capital gains taxes.

Fortunately, things still turned out OK for us despite facing these problems. Since property values were still going up in our area, we managed to get a reasonable offer for our home. We also sold the property ourselves rather than working with a real estate agent, so we cut our commission payment in half and significantly lowered our closing costs. We had also not used a mortgage loan to buy the property in the first place, so our closing costs when we initially bought the house were lower than they otherwise would have been.

Because of all of these factors, we ended up making about a $4,000 profit after accounting for all of the expenses associated with the transaction. Now, we would ordinarily have to pay higher taxes on this money due to the fact we didn't live there for two years and so couldn't avoid capital gains taxes. However, we have some capital losses we can use to offset the gains, so we won't face this problem.

This won't be the case for everyone. If you have to use a real estate agent, your property doesn't go up in value substantially, and you don't have capital losses, then breaking the cardinal real estate rule and selling too quickly is usually going to backfire on you.

But, my situation does show that sometimes breaking the rules isn't the worst thing in the world if conditions are right. Ultimately, you need to consider what makes sense for you when you move forward with buying and selling real estate -- while still remembering that the "rules" are there for a reason.