Looking for advice on refinancing and investing in Colorado

Umar S WIse · 2019-09-19T19:31:27-07:00

My wife and I purchased our home in Northglenn Colorado roughly 3 years ago, due to some force appreciation and they vary fortuitous market in Colorado we’ve made a fair bit of equity and are looking for some ways to invest it. We were looking to find out if it would be better to refinance or we’ve been looking at the option of selling before five years and as far as we understand keeping 100% of the profits without having to pay taxes. We’ve been looking at some single-family residences in the Colorado Springs area to invest in however through the refinance or selling of the house we would have more money to purchase something bigger, possibly a duplex or a triplex. Another question we had was whether or not the Colorado Springs area was still a good market to invest in or if anyone had any insight to some other places such as Aurora or Fort Collins. Any help on any of these questions would be greatly appreciated and at this point I have read 15 books and listen to over 100 hours of podcasts. I’ve been doing a lot of reading around these forums and believe the next best thing for me to do is start reaching out on here. Again thanks any of you for any of your help.

Ian I LeinwandPro Member

Property Manager · Fort Collins, CO · Member since 2018 · 89 posts · 42 votes

7y

Im lookimg at Loveland CO. Key is finding off market deals. What roi are you looking for in a rental.

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Robin Searle

Real Estate Agent · Colorado Springs, CO · Member since 2017 · 224 posts · 201 votes

7y

Colorado Springs is still a very hot sellers market. There are deals to be found but in the lower price points, you'll have a tough time as there is a lot of competition from buyers. I'm still seeing multiple offers and homes going for above list price. Multi-family has been very tough to find anything that will cash flow with 20% down. I'm sure there are off market properties but I also know there are a lot of investors angling for those as well. I get about 10 postcards a week offering to buy my personal home or my rental properties for cash. Um - no thanks! LOL

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JD Gunter

Investor · Ocala, FL · Member since 2018 · 144 posts · 101 votes

7y

I agree with @Robin Searle. I wrote an offer on two small multifamily properties in the last week and both had multiple competing offers.

On the other hand, there is a wholesaler in town who had a single family home off market that I went to see with a client and the cul-de-sac looked like a parking lot because so many other investors were there.

There are so many people going door to door and sending out letters that the local government has been sending out bulletins warning people to avoid wholesalers.

That being said, my partner and I bought our last two houses from the MLS by looking for listings over 30 days. So many people are dog-piling the off market and new listings that the older MLS listings sometimes get ignored. If you could find an old mls listing with a cottage or walkout basement, you might be able to find a deal.

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Jeremy Norman

Rental Property Investor · Colorado Springs, CO · Member since 2019 · 29 posts · 33 votes

7y

I am confused by what you are saying when it comes to your current house. You said you bought your home 3 years ago but are considering selling it to avoid taxes. If you are still living in it, you won’t pay capital gains taxes. As I understand it you just need to live in the house 2 of the last 5 years. If you’re considering selling maybe just keep it as a rental and get a new house - you should have 3 years to decide if you want to continue before you have to pay capital gains, and northern colorado should appreciate the quite a bit in the mean time. If you need the cash for another house, you can refinance your current house or get a second mortgage/heloc to get it (make sure it cash flows though)...

This is the plan we originally had for our first house, but listened to “conventional wisdom” and emotions... regret it thoroughly now though.

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Bill S.Pro Member

Moderator

Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes

7y

@Umar S WIse so I second the need for clarity on your current home. You have an exemption every 2 years of up to $250K in capital gains for an individual and $500 for a couple when you sell your primary residence. Since you are forcing your appreciation it could be what is known as a live in flip. My advise would be to repeat that process. If you can afford to, keep your existing home and buy the next one with the same plan in mind. If you can't afford to keep you existing home (debt to income ratio - talk with a qualified lender) then get your replacement home under contract then sell your current home. It's still easier to at a good price than to buy a good deal. Between now and February is a good time to execute that plan. I would especially focus on older listings as was advised.

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Umar S WIse

OP

Rental Property Investor · Northglenn, CO · Member since 2019 · 4 posts · 0 votes

7y

First off thank all of you for your information and insight into my inquiry. Next, for clarification purposes, my wife and I purchased the house four years ago and have until Next November (November 2020) to make a decision on how to proceed with our refinancing/selling options. We have lived in it the entire time and are on the fence, due to how much it has appreciated already, about selling it. As stated above we have entertained several options when it comes to tapping the equity in our home. We are meeting with the CPA this week and have spoken to a couple investors in our area about this which has been little help. One of the biggest questions on our plate is will it be worth it to pay the 15% in capital gains tax when we sell it later on or will the markets hold in Colorado and my family keep seeing positive gains on this investment. So many questions and I apologize if this is a long winded response. Once again thank you for any of the help that you can provide.

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Umar S WIse

OP

Rental Property Investor · Northglenn, CO · Member since 2019 · 4 posts · 0 votes

7y

@Bill S. Thanks a trillion Bill this really helps!

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Robin Searle

Real Estate Agent · Colorado Springs, CO · Member since 2017 · 224 posts · 201 votes

7y

@Umar S WIse If you keep your home and turn it into a rental property and want to continue investing in real estate, you can always do a 1031 exchange down the road to avoid paying the capital gains. Do a quick google search for the general idea of an exchange. That might relieve some of the pressure you're feeling about having to make a decision based on the tax issue. Another option would be to move back in for two years to re-establish it as a primary residence before you sell it if your situation allowed.

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Dave FosterBusiness Member

Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes

7y

@Umar S WIse, Perfect timing - Hot off the press - here's a BP blog article that will help you clarify your preferred next steps - You've already achieved the advantageous primary residence financing. Now you can sell that tax free if you sell within three years of moving out like @Robin Searle said. Or you could hold longer like @Bill S.suggests and then 1031. And in the meantime you can always refinance while you're still living there to again get the most advantageous financing. Lot's of good options for you.

https://www.biggerpockets.com/blog/rent-not-sell-your-home

The 1031 Investor5137 Reviews

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Looking for advice on refinancing and investing in Colorado

Looking for advice on refinancing and investing in Colorado

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