Flip house or move into to save on cap gains

[Padraig Spellman]

Good evening , I currently have a deal that is going to make a good profit and am not sure if I should flip it or move into it and rent my existing house . I am worried about capital gains tax . My current house would cash flow. Can anyone offer some suggestions. It is in Long Island New York. Thanks 

[Jason Wray]

Quote from @Dave Foster:

@Padraig Spellman, @Jason Wray is on to something with his 1031 to refinance idea. To satisfy the 1031 exchange requirements the property must have been held for investment, and fix n flips do not meet this criteria.

If you approach it as more of a BRRRR strategy and put a renter in it for a year, that would demonstrate that intent. Funny enough there is no statutory holding period but longer is always better in this case.

Moving into it initially would allow you to start the two year clock on it as your primary residence. Which would turn the profit tax-free. But require a longer hold period than a 1031 exchange.

Occasionally we get investors who purchase an investment property to hold but end up having to prematurely sell despite their intent. Maybe something had a major effect on being able to get the property rented like a bear moving into the neighborhood (true story) or an unsolicited offer you couldn't refuse. These things can certainly happen but if they happen multiple times it starts to look a lot less accidental.

Padraig,  

My advice would be to reach out to Dave Foster I have heard all good things and he is the 1031 Exchange Pro.  It woudl be wise to go that route and save yourself a ton of cash and the hassle of dealing with IRS and taxes!  Just message @Dave Foster

@Dave Fosterundefined