Convenient to sell or keep? how much taxes will I pay?

Fayetteville, Arkansas
Buying & Selling Real Estate
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Convenient to sell or keep? how much taxes will I pay?

Nat Serrano
Member since 2016 · 11 posts · 1 vote

I have a triplex I bought in 6+ years ago for 190k, I refinanced and got some cash out, now I owe to the bank 350k and my cash flow is minimal after refinance ($100-200) and now I live far away and because the home is old things have been breaking more often than before($$$$) and contractors do not do a good job if you're not there present in my experience (fix same thing over and over)

The triplex is really old and outdated, but I get renters because is in a really good location and I foresee it will continue to appreciate or at least investors might be interested in buying , tearing down and building something fancy.

So I've been thinking about selling. how much will I make if I sell?

this is my thought process:

A) sell 500k, minus 7% closing, agent commission = 465k minus 350k to the bank = 115k minus 30% capital gain tax = 77k....by the way, will I pay tax capital gains on the net profit? or the gross profit sale? (if I pay on gross sale then it's 500k - capital gain gross sale (30%) = 150k to Sam!

B) sell 500k, minus 7% closing, agent commission = 465k minus 350k to the bank, then do 1031 exchange for those 115k but (as previous debt cannot be used in 1031 exchange) and buy a similar property, the only "problem" is that I live in NYC and 115k will not even buy me a studio here, unless I go to a foreclosure and buy something there

C) keep the property, fix a bunch of things 50k, live with the headache of maintaining a property at the distance, do not make any cash flow for years but hopefully sell in the future for a profit.

thoughts?

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Karl McGarvey
Real Estate Agent · Houston, TX · Member since 2019 · 763 posts · 500 votes
4y

D.) Fix up the property, Cash out Refi AGAIN on the new value. Raise rents to match the new condition of the property, which should continue renting if your location is as good as you say. Hire a property manager to do everything and collect a check once a month. Sell in 10 years for MUCH more money and much less headache.

...just my thoughts

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  • Karl McGarvey
    Real Estate Agent · Houston, TX · Member since 2019 · 763 posts · 500 votes
    4y

    D.) Fix up the property, Cash out Refi AGAIN on the new value. Raise rents to match the new condition of the property, which should continue renting if your location is as good as you say. Hire a property manager to do everything and collect a check once a month. Sell in 10 years for MUCH more money and much less headache.

    ...just my thoughts

    3Reply
  • Nat Serrano
    OP
    Member since 2016 · 11 posts · 1 vote
    4y
    Quote from @Karl McGarvey:

    D.) Fix up the property, Cash out Refi AGAIN on the new value. Raise rents to match the new condition of the property, which should continue renting if your location is as good as you say. Hire a property manager to do everything and collect a check once a month. Sell in 10 years for MUCH more money and much less headache.

    ...just my thoughts


     thank you, makes total sense. I just need to find a reliable contractor that can do the remodel from the distance 

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  • Karl McGarvey
    Real Estate Agent · Houston, TX · Member since 2019 · 763 posts · 500 votes
    4y
    Quote from @Nat Serrano:
    Quote from @Karl McGarvey:

    D.) Fix up the property, Cash out Refi AGAIN on the new value. Raise rents to match the new condition of the property, which should continue renting if your location is as good as you say. Hire a property manager to do everything and collect a check once a month. Sell in 10 years for MUCH more money and much less headache.

    ...just my thoughts


     thank you, makes total sense. I just need to find a reliable contractor that can do the remodel from the distance 

    Try calling some local PMs for recommendations - they are going to be trying to earn your business so they theoretically would have a vested interest in your rehab going well so that they can manage your property afterwards.
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  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    4y

    @Nat Serrano The reinvestment requirement for a 1031 (if you want to defer all tax) is a two part rule, you have to purchase at least as much as you sell, and you have to use all your cash proceeds to do so. When you do a 1031 your reinvestment target is determined by your net sale, so if you end up with a net sale of 465k then you would have to purchase at least 465k in real estate. You pay of your debt with the money from the sale and then are left with 115k which would be your cash proceeds. So you would be looking to purchase 465k in real estate using 115k in cash. You can use your own cash or take out another loan to do this.

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