1031exchange or buy out ex-husband

1031 Exchanges
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1031exchange or buy out ex-husband

Jen Hoang
Investor · San Diego, CA · Member since 2015 · 96 posts · 37 votes

I have a property I own with my ex-husband. It's in Houston, TX. I consider it an "A" property. Good Area, good school district. Tenant always pays on time and has a great job. The lease is coming up for renewal and my ex wants to 1031 the property or sell it. I don't want to sell it and I am not ready to do a 1031. Here are my questions:

Can we both 1031 into separate properties?

If I buy him out, how do I calculate the price? This property is worth ~250k, and we owe about ~$45k. 

Thanks in advance!

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Robert Herrera
Investor · Denver, CO · Member since 2015 · 492 posts · 267 votes
8y
Jen Pothilat I’d do a cash out refinance. First get an appraisal so you know what the actual value is. If it is $250k then subtract the $45k leaving $205k divided by 2=$102,500 equity each. Cash out refi at 70% loan to value. That’s $250k at 70%= $175k New Mortgage! Split the closing costs or make him pay the closing cost since you are taking on the debt. $175k -$45k old debt= $130k. $130k- $102,500 = $27,500 cash out in your bank account. You pay no taxes on any of this as you don’t pay taxes in a loan. He pays taxes on the $102k as it’s considered income from you buying him out. Plus he pays you for the closing costs.
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  • Natalie KolodijBusiness Member
    Moderator
    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    8y

    Yes- You can sell one property and purchase two with a 1031 exchange.

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    0Reply
  • Jessica Zolotorofe
    Attorney · NJ · Member since 2016 · 1k+ posts · 794 votes
    8y

    Do you own the property in an LLC or as tenants in common?

    0Reply
  • Jen Hoang
    OP
    Investor · San Diego, CA · Member since 2015 · 96 posts · 37 votes
    8y

    tenants in common

    0Reply
  • Natalie KolodijBusiness Member
    Moderator
    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    8y

    @Dave Foster

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  • Matt K.
    Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    8y

    Buy him out and get him off the deed.... 

    Also, I'm sure this can get verified (I might be wrong) but I think if both names on the deed then both have to go on next deed, but I might be getting that mixed up w/ LLC...

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  • Robert Herrera
    Investor · Denver, CO · Member since 2015 · 492 posts · 267 votes
    8y
    Jen Pothilat I’d do a cash out refinance. First get an appraisal so you know what the actual value is. If it is $250k then subtract the $45k leaving $205k divided by 2=$102,500 equity each. Cash out refi at 70% loan to value. That’s $250k at 70%= $175k New Mortgage! Split the closing costs or make him pay the closing cost since you are taking on the debt. $175k -$45k old debt= $130k. $130k- $102,500 = $27,500 cash out in your bank account. You pay no taxes on any of this as you don’t pay taxes in a loan. He pays taxes on the $102k as it’s considered income from you buying him out. Plus he pays you for the closing costs.
    2Reply
  • Matt K.
    Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    8y

    I'd be curious how that plays out, if he wants to do a 1031 he's likely aware of how to defer taxes and is probably not going to want to pay them....

    0Reply
  • Jen Hoang
    OP
    Investor · San Diego, CA · Member since 2015 · 96 posts · 37 votes
    8y

    Thanks for the advice everyone! 

    @Robert Herrera, The cash out finance sounds good to me! Then I could go and buy another property :)

    1Reply
  • Robert Herrera
    Investor · Denver, CO · Member since 2015 · 492 posts · 267 votes
    8y
    Jen Pothilat make sure the title company takes him off the title! Very important. Double check even at closing. Smart women buying another property with your tax free money!
    1Reply
  • Jen Hoang
    OP
    Investor · San Diego, CA · Member since 2015 · 96 posts · 37 votes
    8y

    @Robert Herrera Thanks for the tip. Very important! 

    Now I'm excited at the possibility of a new investment property. That will make it #4 for me:-)

    1Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    8y

    @Jen Hoang, as tenants in common you can sell that property and each one of you could do your own exchange on your half.  Or one of you could do an exchange on your half and the other one take the cash and associated tax.  Or for that matter you could stay together and do one exchange into another asset.  But I'm guessing that's a non starter.

    Point is you can each get apart from each other using a 1031.

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    1Reply
  • Jen Hoang
    OP
    Investor · San Diego, CA · Member since 2015 · 96 posts · 37 votes
    8y

    @Dave Foster Thanks! That's good to know. But I think I'd like to keep this property. It is doing well and has never given us problems. 

    0Reply
  • Jen Hoang
    OP
    Investor · San Diego, CA · Member since 2015 · 96 posts · 37 votes
    8y

    @Robert Herrera Why are we  $175k New Mortgage - $45k old debt? This part I don't quite understand.

    0Reply
  • Matt K.
    Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    8y
    Originally posted by @Jen Hoang:

    @Robert Herrera Why are we  $175k New Mortgage - $45k old debt? This part I don't quite understand.

     You can't have a loan for 100% value of the property.

    0Reply
  • Robert Herrera
    Investor · Denver, CO · Member since 2015 · 492 posts · 267 votes
    8y
    Jen Pothilat the bank will loan you the $175k. They will pay off the old loan of $45k with the funds from the $175k. Leaving you with $130k cash in your account.
    1Reply
  • Jen Hoang
    OP
    Investor · San Diego, CA · Member since 2015 · 96 posts · 37 votes
    8y

    @Robert Herrera @Matt K. Ok Got it! It's been a long week. lol

    1Reply
  • Matt K.
    Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    8y

    Appraisal value can be lower than market value too fyi

    1Reply
  • Jen Hoang
    OP
    Investor · San Diego, CA · Member since 2015 · 96 posts · 37 votes
    8y

    I was just informed that I can't do a cash out refi since it's a rental property in Texas :(

    0Reply
  • Jen Hoang
    OP
    Investor · San Diego, CA · Member since 2015 · 96 posts · 37 votes
    8y

    How much should I offer my ex in cash?

    0Reply
  • Andrew B.
    Rockaway, NJ · Member since 2016 · 2k+ posts · 2k+ votes
    8y
    Originally posted by @Jen Hoang:

    How much should I offer my ex in cash?

     the lowest amount you think he will accept lol

    0Reply
  • Jen Hoang
    OP
    Investor · San Diego, CA · Member since 2015 · 96 posts · 37 votes
    8y

    Is this a TX rule or should I ask another bank? I talked to wellsfargo.

    0Reply
  • Robert Herrera
    Investor · Denver, CO · Member since 2015 · 492 posts · 267 votes
    8y
    Jen Pothilat who told you that you can’t do a cash out refinance?
    0Reply
  • Robert Herrera
    Investor · Denver, CO · Member since 2015 · 492 posts · 267 votes
    8y
    Jen Pothilat you need a BROKER not a BANKER. Banks only sell you loans they have. A broker will do a cash out refinance because they can use ANY AVAILABLE loan.
    0Reply
  • Jen Hoang
    OP
    Investor · San Diego, CA · Member since 2015 · 96 posts · 37 votes
    8y

    @Robert Herrera Wellsfargo Bank. They said because it's a rental property not my primary residence

    0Reply
  • Robert Herrera
    Investor · Denver, CO · Member since 2015 · 492 posts · 267 votes
    8y
    Jen Pothilat Wells Fargo sucks in my opinion. Google mortgage brokers in your area and start dialing.
    0Reply
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