Should I sell now or wait till October?

Question

I am in the middle of a Live-in flip (purchased in October of 2019).

My original plan was to wait 2 years to avoid capital gains taxes.  I am just worried that we are in a bubble and I want to capitalize before it pops.  This is a 1 bedroom condo that does not make sense to rent out.

Purchase price: 390k

Rehab:  30k

Current value: 485k

When I say 485k, I mean that if I put it on the market for that price today then it would have 10 offers for that price within a day.

So the main question is:

Do I sell it now and pay the higher taxes on the sale, or do I gamble with waiting till October to avoid paying capital gains taxes?

Steve Vaughan · Answer

I'd wait. I don't see the low inventory,  high demand of today changing before Oct.

Take advantage of the biggest tax break Uncle Sam offers.

I have a rental I'm considering putting on the market for sale. The renters just moved out and listings are down 86% from Jan last year in my market.  220 normal, only 30 listed total.  What???   I normally sell FSBO so I may try that for a week or 2, but this is a regular rental I've held a few years.

Bradley Sriro · Answer

I agree with @Steve Vaughan... I would wait until October so you can get the biggest tax benefit and exclude up to $250,000 of taxable gains (assuming you are single or $500,000 for married couples). I think that factors such as short supply/ high demand, low interest rates, and asset price inflation due to the massive injection of liquidity into the capital markets will all keep property values elevated for the foreseeable future. You may even end up with quite a bit more appreciation between then and now. All said, I think the odds are in your favor.

Mark Smith · Answer

MY reply didn't show up?  Can you 1031 exchange the property?    The incoming admin may change the capital gains rules too so an exchange may be an option if your property qualifies.

Mark Smith · Answer

Thanks for the clarification, I've never lived through a full cycle exchange so wasn't sure the qualifications.  I do see this experience coming up for me sometime in the future... 2022 likely.

Bill Exeter · Answer

Hi @Mark Smith,

It is a "live-in" flip, so it does not qualify as investment property.  It would fall under Section 121 of the Internal Revenue Service ("121 Exclusion") where you can exclude up to $250,000 in taxable gain per owner if you have lived in the property for at least 2 out of the last 5 years.

Brian G. · Answer

@Bradley Sriro sorry about that, my comment was directed toward the OP @Ryan Cleary

Bradley Sriro · Answer

Hey Brian, I am not sure what you are talking about... I didn't say anything about a property dropping in value the equivalent of capital gains tax in 2021. Was that comment meant for someone else?

Brian G. · Answer

@Bradley Sriro I find it highly improbable that your property would drop in value the equivalent of capital gains tax in 2021. Hold and sell in October.

Should I sell now or wait till October?

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