From MultiFamily to a Home of One's Own

While managing two rental apartments takes up a considerable amount of the Rumains' time, they don't mind so much because they view it as only temporary. In a few years, as their family grows, they plan to take over one of the rental units for themselves. And down the line, they may decide to convert the entire house into a single-family, in which case they'll be eligible for yet another tax perk: When it comes time to sell, the Rumains will get the full capital-gains tax exemption on profits of up to $500,000 ($250,000 for single filers), as long as they use the entire house as their primary residence for at least two of the five years preceding the sale.

Another long-term approach is to convert the rental apartments into condominiums, a move allowed in most neighborhoods zoned for multifamily houses, and sell off the individual units. That's the strategy Kevin and Jennifer Deblear are considering. The couple recently purchased a two-family 1905 Queen Anne for just over $300,000 in Boston's Dorchester neighborhood, where an average single-family home costs more than $400,000. "If we condoed and sold one apartment, it would likely pay back our whole mortgage," Jennifer says. "If we sold both apartments, we might be able to buy a single-family house in the neighborhood that was out of our reach when we purchased the house we're in now."

As property values continue to rise in urban areas once deemed "transitional," multiunit houses will increasingly look like can't-miss bargains. "We feel fortunate," says Matthew Rumain. "The job market stinks, and you never know what will happen in life. But we now have the security of knowing that we can pay our mortgage, raise and educate our child well, and live in the kind of home we can be proud of."

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