I own house 50/50 with my (x) boyfriend. We've been in it 6 years - I am considering letting him buy me out. Is there anything I should be concerned with? i.e. the money I make when sell out will that be affected by capital gains if I don't reinvest right away? or anything else you can think of?
Steph,
You'll owe taxes one way or another. Doesn't matter if you reinvest the money or not. Sounds like you lived there, so don't think a 1031 exchange will help you.
If you lived there two of two last five years then you can take the exemption, $250,000 with no taxes.
I'd be worried about getting the paperwork straightened out. Use a title company to do the transaction. They'll charge you some fees, but you can be sure the paperwork is done and filed correctly. You want to be sure you get the money, and that you name is off all the paperwork. Especially any loans. He should refi the property and pay off any loans that are in your name. Get an appraisal or otherwise agree on the price. Get the title company to determine the net proceeds from "selling" the house at that price, less all loan payoffs and costs. He gives you half that amount and you (and maybe him, since both you are now the owners) give him a warranty deed for the property. No money, no deed.
Call some local title companies, tell them what you want to do. Ask if they can do the transaction for you and what it will cost.
I own house 50/50 with my (x) boyfriend. We've been in it 6 years - I am considering letting him buy me out. Is there anything I should be concerned with? i.e. the money I make when sell out will that be affected by capital gains if I don't reinvest right away? or anything else you can think of?
Thanks
steph
Steph,
1. This is a sale. It might be to your ex or it might be to a third party if he can not afford to buy you out cleanly.
2. If this was your primary residence you can do as Jon suggests. $250K of the profit you can declare and not pay any income tax at the Federal level.
3. You want a clean deal or you want a deal that you fully understands. The cleanest is a sale/refi where you are off the title and the existing financing is paid off (replaced).
This means that nothing he does in the future will mess you up. Even if he is a great guy his next partner might come with baggage. You want out of the deal.
4. Some would consider seller financing. If you are going to even think about that as an option (a 2nd loan where you receive monthly payments, etc) it needs to be done with your eyes open. If he misses any payments, fails any other condition of the loan then he is in default and you will pay to have him foreclosed upon. NO if, ands or buts. Or just avoid doing any seller financed deal.
You need a clear line in the ground like one in concrete so there is no wiggle room or future problems. Stuff happens. You do not want this being a problem in the future just because you were too XXXX to get it done right now.
Good luck. You know how to reach me if you need more specific advice.