My grandparents are retired and own their home outright here in Hawaii. It's probably worth a little over $1.2 million , and they're considering selling it and moving to Las Vegas. Their plan is to buy two SFHs in Vegas with cash from the proceeds of the Hawaii sale, live in one and rent out the other. When they pass, one of the homes would go to my mom and the other to my uncle. A little more context: • They would prefer not to re-leverage the Hawaii house (or use leverage on the Vegas homes), though they haven't ruled it out. • House hacking (either with roommates or in a MFR) isn't an option for them. • They chose Vegas because it's the 9th Hawaiian island and they visit 2-3 times per year. I'm wondering if there are any other creative strategies for us to consider. Don't know that there is, but I figured I'd put it out to BP nation.

@Travis Henry @Isi Nau NOT TRUE NOT TRUE NOT TRUE. A heloc will not reduce the capital gain or the taxes due one penny. Pay the $60k in taxes if you have a $900k gain, 7% tax is almost zero. You’re new residence will be an income tax free state and you’ll start saving towards the $60k.

Hey Travis. One thing to consider when they sell is the tax liability. Take $1.2M and subtract the associated costs of the home (i.e. purchase price, closing costs (purchase and sale), and remodel costs). If I had to guess, I'd estimate the total associated costs at about $250k-$300k. Let's assume it's $300k. This would leave them with a $900k gain. I assume they've lived in the home for 2 of the last 5 years, so that's another $500k reduction bringing them to a $400k gain, which will be subject to tax. How much tax depends on a lot of personal/unique factors. If we assumed a 15% tax rate, that'd be $60k in taxes. If they aren't planning on moving for a year or more, they could do a HELOC or cash out refi for $400k or more, and use the money to buy their first Vegas property for cash. This will allow them to sell their Hawaii property tax free, or close to it, because the $400k loan will reduce their gain when they sell. You'll want to consult a mortgage expert and tax professional, since I am neither. :) They can help provide concrete numbers to this option.

Hey Travis - where in hawaii? i own a few properties in Vegas and have been thinking about selling one or two and buy something in hawaii instead for a while haha - i actually just decided to not renew the lease on one and list it for sale at the end of the month, and consider selling another one - its a shot faaaar into the blue, but maybe we could structure a deal.......? That way both parties could eliminate some tax liability, and a good chunk of realtor fees... would obviously need some talking tho to work something out! Send me a PM if that is something thats generally of interest to you guys! 🤯🤔

Not sure about that borrowing against a home does not change the basis for which gains are computed.. and if they only owe 60k in tax's my vote would be to just pay them.. and smile at your good fortune.. I agree about Hawaii being the 9th state Hawaiian airlines really has a monopoly on that route price is double any other route.. so when I go in December I have to fly to PDX first then go over.. still far cheaper. LOL even though I would love to have the lie flat seats Hawaiin offers on the 350..

@Bill Brandt THANK YOU THANK YOU THANK YOU for the enthusiastic response. I hope to be at a point one day when I can say $60,000 in taxes is next to zero. ;)

1.2 Mil is a lot of equity to be sitting in one or two doors. If invested properly, the capital can be spread across thousands of income rental properties mitigating the risk while still producing solid cashflow...

@Travis Henry Hi Travis, There are some great responses before me.Considering your parents occupied the house for last 5 yrs. My 2 cents would be, pull out heloc to purchse a house in Vegas. Rent current Hawaii Kai house for sometime and before 2 yrs out of 5 is over sell it to do a 1031 exchange. This should get them $500K tax exemption and they can 1031 the remaining balance into some investment properties. Again, I am not a CPA or tax attorney and each case is different so consult your CPA.

@Scott Smith Thanks Scott! I'll pass along your blog post! @Ola Dantis @Noah Mccurley Amen! @Enrique Mejia We briefly discussed a 1031 with a scenario similar to what @Dave Foster mentioned in his post. Dave was also spot on about their intention to keep things as simple as possible. In this case, it seems like buying two Vegas homes with the proceeds from the Hawaii sale is the most optimal option. @Jay Hinrichs I think they travel with Vacations Hawaii - Omni Airlines. Definitely not a Hawaiian Airlines, but to them, the convenience of the Vacations Hawaii package can't be beat!

Not sure your Grandparents employment or income status, but if they do not qualify for a traditional loan, even if they do, a HELOC on the Hawaii property will allow them to buy a property in Vegas with cash before the Hawaii property sells. Once it sells they can just pay off the HELOC.

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Updated over 5 years ago on 09/17/2019. Most recent reply

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Travis HenryPoster

Investor
Camas, WA

Buying & Selling Real Estate

What to do with a $1 million house?

Travis HenryPoster

Investor
Camas, WA

Posted September 13, 2019 18:57

My grandparents are retired and own their home outright here in Hawaii. It's probably worth a little over $1.2 million , and they're considering selling it and moving to Las Vegas.

Their plan is to buy two SFHs in Vegas with cash from the proceeds of the Hawaii sale, live in one and rent out the other. When they pass, one of the homes would go to my mom and the other to my uncle.

A little more context:

They would prefer not to re-leverage the Hawaii house (or use leverage on the Vegas homes), though they haven't ruled it out.
House hacking (either with roommates or in a MFR) isn't an option for them.
They chose Vegas because it's the 9th Hawaiian island and they visit 2-3 times per year.

I'm wondering if there are any other creative strategies for us to consider. Don't know that there is, but I figured I'd put it out to BP nation.

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Frank Wong

Real Estate Broker
Bay Area

Frank Wong

Real Estate Broker
Bay Area

Replied September 13, 2019 19:25

Sounds like a perfect plan given their age and their goals. I agree leveraging the Hawaii or Vegas house makes zero sense. You want zero risks at this point of their lives. Maybe buy 2 nice medium price homes cash sit on them. Put the rest away and enjoy the buffet at the Wynn.

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