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Starter Home to Forever Home


Upgrading from a starter home to a more permanent (i.e., “forever”) home is an exciting and important step in a young family’s life. 

Given the nature of executing dual transactions, which includes selling your current home, purchasing a new one, financing a renovation, and coordinating the timing of the move can be costly and confusing. 

Let’s discuss the key considerations to keep in mind when making the move.  

Forever Home

A “forever” home is one that you can imagine living in for a very long time. It may have a larger kitchen, more bedrooms, a backyard, etc. With these bonuses, this home may be considerably more expensive. 

Here are our tips and considerations when upgrading to a larger and more valuable residence.

Considerations When Selling Your Home

  1. Investing in Staging the Home to Maximize the Sale Price
  2. Capital Gains Tax Implications
  3. Sale-Leaseback Possibilities  
  4. Bridge Financing Solutions 

Staging Your Home

Many homeowners chose to stage their home to increase its appeal and potential value when selling. It also helps potential home buyers to envision how the home might look once they move into it. 

According to the 2021 Profile of Home Staging, a report from the National Association of Realtors, 47% of buyers’ agents said that staging positively affected most buyers’ opinions of a home. We recommend you evaluate the pro’s and con’s with your agent on this matter and if you choose to proceed with staging the property, ensure you have ample cash to complete the job. 

Capital Gains Implications

If you sell a property in less than 1 year of owning it, the short-term capital gains is taxed as ordinary income, which could be as high as 37%, plus state income taxes. 

Long-term capital gains for properties owned over one year are typically taxed at 15-20%, plus state income taxes. In general, calculating your capital gains tax depends on several factors:

  1. Your Income Tax bracket
  2. Your marital status
  3. How long you’ve owned the house
  4. If the house was your primary residence, a secondary residence, or an investment property
  5. The state in which your property is located 
  6. Other factors 

Luckily, if you’ve lived in your home for 2 years or more, you may exclude the first $250,000 of taxable gains (if your tax-filing status is single) and up to $500,000 of gains (if married filing jointly). This exemption is only available once every two years. 

Consult with your tax advisor to assess your specific tax implications. 


A sale-leaseback is a transaction in which you, the owner of a property, enters into an agreement to: 

  1. Sell the property to a buyer and
  2. Lease the property back from the buyer for a designated period.

A Sale-Leaseback would allow you additional time to actually move to your new home following the sale of your original home. Sale-leasebacks are particularly valuable when the new property is being renovated and/or if the sale happens to come during the middle of a school year.   

Consult with your realtor and/or real estate attorney to help you coordinate a sale-leaseback transaction. 

Bridge Financing 

According to Rocket Mortgage, bridge loans give you access to additional money with which to purchase a piece of real estate by allowing you to tap into added funds. Additionally, you can use any equity that you hold in your current home prior to its actual sale. Bridge loans’ terms, conditions, and fees can vary greatly between individual transactions and lenders.

Why are Bridge Loans helpful?

  1. A bridge loan offers you the opportunity to buy a new house before you’ve sold your current home.
  2. You can make an offer on a new home without having to implement a sale contingency.

Bridge financing may be accessed via banks, credit unions, and other financial institutions.

Considerations When Purchasing Your Forever Home

  1. K-12 School Considerations for your Children 
  2. Financing Renovation Costs
  3. Paying for New Furnishings
  4. General Financing in Today’s Environment

K-12 School Considerations

If you have children, it is important to factor in their education options. The first question you need to ask yourself, will you be going public or private?

If you’re going public, it is important to find a new home in a great school district that works for your family. Conversely, if going private, location matters less but your housing budget might be more constrained given the added private school tuition expense.

If you’re looking for the right school for your children, many cities have School Admissions Consultants to help you evaluate the public and private schools in the areas you wish to live in.

Financing Renovation Costs

When renovating, you will need ample cash to cover any unforeseen expenses or extra costs. For context, according to Bank Rate, the average cost of common home improvement projects are: 

  • Whole house renovation: $500 to $800 per square foot 

Home improvements, while costly, may be worth the expense if the project adds value to your home and doesn’t compromise your long-term financial objectives. 

On average, homeowners recoup 74 cents for every dollar they spend on renovation when they sell. 

Aside from tapping your cash reserves, there are a number of ways to finance a home renovation project. 

  1. Draw upon non-retirement investment accounts 
  2. Access capital via a flexible (variable rate) Home Equity Line of Credit 
  3. Residential Construction Loan 

A Home Equity Line of Credit (HELOC). A HELOC is a secured loan, backed by your home, typically with lower interest rates than with an unsecured loan. 

A New Home / Major Construction Loan is a short-term loan that covers only the costs of custom home building. Construction loans typically cover up to 70 or 80% of the home’s future value and may be converted to a fixed-rate mortgage at the end of the construction period. 

When you take out a construction loan, you’ll typically make interest-only payments while the construction is being completed. These loans may have higher interest rates than most home loans. You can use it to cover the total cost of building a home, including the land, labor, materials, and soft-costs such as permits and architectural/design fees.  

Consult with an experienced banker and/or independent mortgage consultant to evaluate your various mortgage and construction financing options. 

New Furnishings & Finishes

Since you are most likely moving to a space with a lot more space, you may need to purchase a number of furnishings. The best way to do this is using cash or drawing upon non-retirement investment accounts. 

Consult with a designer to help you properly budget for this expense and come up with a proper timeline that suits your needs. 

In Summary

Upgrading to a more permanent resident (i.e., a forever home) is an important step in a young family’s life. Given the multiple transactions at hand, we recommend consulting with a team of trusted professionals to strategize around your specific situation.

The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.