Repairs prior to 1031
I am getting ready to help my mom sell and then 1031 a property in LA. The current tenants have really destroyed the house and the landscaping, and it really needs work to get it back into good shape. The issue we have now is, do we fix it up to some degree, or do we let it go as it is.
After the mortgage is paid there will be about $1M left in equity if the house sells at the lower end current market value. However, we think that the top market value could earn us an extra $150,000-$200,000. The issue is, do we fix it up before the sale/1031 and to what degree?
Really, the plan is to pay boot tax on existing mortgage debt and take cash out, trade down into some multi unit places with higher yields.
The thing is, we will have to take out a loan to rehab and pay that loan back with funds that have the taxable boot applied. We found out our boot will be about 25%...
I just wanted to see if anyone has an advice or tips on how to look at this.
Thanks
Burke