Should we sell or rent after property is rehabbed?

4 Replies

Purchased a house with HELOC for $192k. Rented it for 6 mos now we are in the middle of the rehab. Once the rehabbed we can rent it for $1950. Keep for 2 years and then sell using 1031 exchange to avoid Capital Gains. Or we can sell it now for about $350k and pay the higher taxes. If I am understanding correctly if we sell it now profits would probably be considered ordinary income but we could directly deduct all the rehabbing. If we sell later taxes are lower but a lot of the improvements would have to be depreciated and paid back once sold. We are looking at about $130k gain. Any thoughts/suggestions are appreciated. Thanks!

Isn't 1+ years considered a long term capital gain which is usually a lower tax rate than short term capital gain? Maybe that is the happy medium between full taxes and 1031 no taxes.