Fork in the road for my real estate journey

7 Replies

I have a decision to make and I am not sure what my best option is.  I would like the opinion of others here on what they would do if they where in my situation.  Here are the factors to the equation.

1. I own a house hacked triplex with FHA 3.375% interest rate

2. It has about 150k in equity

3. It has some capex costs that will be hitting in the next 5/10 years (roof, pipes)

4. Current numbers on the triplex $2400 in rent $2400 mortgage with me living in the third unit

Some options I have thought of:

1. Refi out of the fha and get as much cash as I can then try to find another househack while building savings for capex over the next 5 years.

2. Sell the property with 1031 exchange into a larger fha househack (May be hard because my income is fairly low)

3. Sell property and pay the capital gains taxes and hold it for an opportunity.  I have a friend who works in wholesaling and I think I could put together a deal between the two of us and raising some money from family/friends.

My goals are to build my real estate portfolio for passive income however because this is my first property I am struggling to figure out if I am better off with the chunk of cash to work with or holding onto it and buying more as I can save for more properties.

Thanks for reading and look forward to your suggestions.

Originally posted by @Chris Gibbs :

I have a decision to make and I am not sure what my best option is.  I would like the opinion of others here on what they would do if they where in my situation.  Here are the factors to the equation.

1. I own a house hacked triplex with FHA 3.375% interest rate

2. It has about 150k in equity

3. It has some capex costs that will be hitting in the next 5/10 years (roof, pipes)

4. Current numbers on the triplex $2400 in rent $2400 mortgage with me living in the third unit

Some options I have thought of:

1. Refi out of the fha and get as much cash as I can then try to find another househack while building savings for capex over the next 5 years.

2. Sell the property with 1031 exchange into a larger fha househack (May be hard because my income is fairly low)

3. Sell property and pay the capital gains taxes and hold it for an opportunity.  I have a friend who works in wholesaling and I think I could put together a deal between the two of us and raising some money from family/friends.

My goals are to build my real estate portfolio for passive income however because this is my first property I am struggling to figure out if I am better off with the chunk of cash to work with or holding onto it and buying more as I can save for more properties.

Thanks for reading and look forward to your suggestions.

 #1 based on what you have posted. No idea what you paid for this place but it sounds like you're pulling at least 1% (1200x3 rent) guessing based on the size of the mortgage. If you have that much equity sitting there at this point, I would consider harvesting it through a refi. If you've been there 2 years there's not going to be any capital gains, if you decide you want to sell, but unless you're going to stay on your parent's couch you'll need to find another place to live and $1200 isn't living real extravagant in the first place. 

Originally posted by @JD Martin :
Originally posted by @Chris Gibbs:

I have a decision to make and I am not sure what my best option is.  I would like the opinion of others here on what they would do if they where in my situation.  Here are the factors to the equation.

1. I own a house hacked triplex with FHA 3.375% interest rate

2. It has about 150k in equity

3. It has some capex costs that will be hitting in the next 5/10 years (roof, pipes)

4. Current numbers on the triplex $2400 in rent $2400 mortgage with me living in the third unit

Some options I have thought of:

1. Refi out of the fha and get as much cash as I can then try to find another househack while building savings for capex over the next 5 years.

2. Sell the property with 1031 exchange into a larger fha househack (May be hard because my income is fairly low)

3. Sell property and pay the capital gains taxes and hold it for an opportunity.  I have a friend who works in wholesaling and I think I could put together a deal between the two of us and raising some money from family/friends.

My goals are to build my real estate portfolio for passive income however because this is my first property I am struggling to figure out if I am better off with the chunk of cash to work with or holding onto it and buying more as I can save for more properties.

Thanks for reading and look forward to your suggestions.

 #1 based on what you have posted. No idea what you paid for this place but it sounds like you're pulling at least 1% (1200x3 rent) guessing based on the size of the mortgage. If you have that much equity sitting there at this point, I would consider harvesting it through a refi. If you've been there 2 years there's not going to be any capital gains, if you decide you want to sell, but unless you're going to stay on your parent's couch you'll need to find another place to live and $1200 isn't living real extravagant in the first place. 

 From my research I found that if I where to sell only 1/3 of the profits would be tax free since that is the % of the property I am using as personal residence.  I may have read the tax law wrong though.  In the case of option 3 for example I would rent a place or move into the flip/brrr we end up buying.

Originally posted by @Chris Gibbs :
Originally posted by @JD Martin:
Originally posted by @Chris Gibbs:

I have a decision to make and I am not sure what my best option is.  I would like the opinion of others here on what they would do if they where in my situation.  Here are the factors to the equation.

1. I own a house hacked triplex with FHA 3.375% interest rate

2. It has about 150k in equity

3. It has some capex costs that will be hitting in the next 5/10 years (roof, pipes)

4. Current numbers on the triplex $2400 in rent $2400 mortgage with me living in the third unit

Some options I have thought of:

1. Refi out of the fha and get as much cash as I can then try to find another househack while building savings for capex over the next 5 years.

2. Sell the property with 1031 exchange into a larger fha househack (May be hard because my income is fairly low)

3. Sell property and pay the capital gains taxes and hold it for an opportunity.  I have a friend who works in wholesaling and I think I could put together a deal between the two of us and raising some money from family/friends.

My goals are to build my real estate portfolio for passive income however because this is my first property I am struggling to figure out if I am better off with the chunk of cash to work with or holding onto it and buying more as I can save for more properties.

Thanks for reading and look forward to your suggestions.

 #1 based on what you have posted. No idea what you paid for this place but it sounds like you're pulling at least 1% (1200x3 rent) guessing based on the size of the mortgage. If you have that much equity sitting there at this point, I would consider harvesting it through a refi. If you've been there 2 years there's not going to be any capital gains, if you decide you want to sell, but unless you're going to stay on your parent's couch you'll need to find another place to live and $1200 isn't living real extravagant in the first place. 

 From my research I found that if I where to sell only 1/3 of the profits would be tax free since that is the % of the property I am using as personal residence.  I may have read the tax law wrong though.  In the case of option 3 for example I would rent a place or move into the flip/brrr we end up buying.

 That's a good point. I think it depends on how you have been claiming this on your taxes. @Linda Weygant , @Natalie Kolodij I bet can help answer that tax question.

Originally posted by @JD Martin :
Originally posted by @Chris Gibbs:
Originally posted by @JD Martin:
Originally posted by @Chris Gibbs:

I have a decision to make and I am not sure what my best option is.  I would like the opinion of others here on what they would do if they where in my situation.  Here are the factors to the equation.

1. I own a house hacked triplex with FHA 3.375% interest rate

2. It has about 150k in equity

3. It has some capex costs that will be hitting in the next 5/10 years (roof, pipes)

4. Current numbers on the triplex $2400 in rent $2400 mortgage with me living in the third unit

Some options I have thought of:

1. Refi out of the fha and get as much cash as I can then try to find another househack while building savings for capex over the next 5 years.

2. Sell the property with 1031 exchange into a larger fha househack (May be hard because my income is fairly low)

3. Sell property and pay the capital gains taxes and hold it for an opportunity.  I have a friend who works in wholesaling and I think I could put together a deal between the two of us and raising some money from family/friends.

My goals are to build my real estate portfolio for passive income however because this is my first property I am struggling to figure out if I am better off with the chunk of cash to work with or holding onto it and buying more as I can save for more properties.

Thanks for reading and look forward to your suggestions.

 #1 based on what you have posted. No idea what you paid for this place but it sounds like you're pulling at least 1% (1200x3 rent) guessing based on the size of the mortgage. If you have that much equity sitting there at this point, I would consider harvesting it through a refi. If you've been there 2 years there's not going to be any capital gains, if you decide you want to sell, but unless you're going to stay on your parent's couch you'll need to find another place to live and $1200 isn't living real extravagant in the first place. 

 From my research I found that if I where to sell only 1/3 of the profits would be tax free since that is the % of the property I am using as personal residence.  I may have read the tax law wrong though.  In the case of option 3 for example I would rent a place or move into the flip/brrr we end up buying.

 That's a good point. I think it depends on how you have been claiming this on your taxes. @Linda Weygant , @Natalie Kolodij I bet can help answer that tax question.

 And regarding the numbers for the triplex 3600 per month if I collected for my unit and the property is worth 500-510k.  Owe 356k.

Welcome to BP. I have a background in engineer myself, so I completely understand the struggle. But as long as you have a strong mindset and taking action, good things will keep coming your way. My advice is to start networking with others in your area. Join meetups and learn from what others have done. Good luck!

Originally posted by @Chris Gibbs :
Originally posted by @JD Martin:
Originally posted by @Chris Gibbs:

I have a decision to make and I am not sure what my best option is.  I would like the opinion of others here on what they would do if they where in my situation.  Here are the factors to the equation.

1. I own a house hacked triplex with FHA 3.375% interest rate

2. It has about 150k in equity

3. It has some capex costs that will be hitting in the next 5/10 years (roof, pipes)

4. Current numbers on the triplex $2400 in rent $2400 mortgage with me living in the third unit

Some options I have thought of:

1. Refi out of the fha and get as much cash as I can then try to find another househack while building savings for capex over the next 5 years.

2. Sell the property with 1031 exchange into a larger fha househack (May be hard because my income is fairly low)

3. Sell property and pay the capital gains taxes and hold it for an opportunity.  I have a friend who works in wholesaling and I think I could put together a deal between the two of us and raising some money from family/friends.

My goals are to build my real estate portfolio for passive income however because this is my first property I am struggling to figure out if I am better off with the chunk of cash to work with or holding onto it and buying more as I can save for more properties.

Thanks for reading and look forward to your suggestions.

 #1 based on what you have posted. No idea what you paid for this place but it sounds like you're pulling at least 1% (1200x3 rent) guessing based on the size of the mortgage. If you have that much equity sitting there at this point, I would consider harvesting it through a refi. If you've been there 2 years there's not going to be any capital gains, if you decide you want to sell, but unless you're going to stay on your parent's couch you'll need to find another place to live and $1200 isn't living real extravagant in the first place. 

 From my research I found that if I where to sell only 1/3 of the profits would be tax free since that is the % of the property I am using as personal residence.  I may have read the tax law wrong though.  In the case of option 3 for example I would rent a place or move into the flip/brrr we end up buying.

 Correct! 

Since you occupy one unit- that unit will qualify for the 2/5 year rule (if you've lived there for at least 2 years) for the 121 exclusion and be tax free. 

You can combine this with a 1031 exchange and defer the taxable gain from the other 2 units into a new property and have the whole transaction be tax free.