Updated 6 days ago on . Most recent reply
Need a strategy. So Cal Property under market
I can get a property in L.A. for 450k and minimum values are 750k in the area. I have owned many properties before. However, its been 15 years since my last purchase. Property would rent for mortgage payment coverage but no more with current rates.
Do I flip this and take the hit on Cap Gains or Keep and hold for 2 years as primary and house hack the rooms then sell? I am not sure if I could find another deal in time for a 1031 exchange as bargains are few and far between.
What are the thoughts on this?
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- Qualified Intermediary for 1031 Exchanges
- St. Petersburg, FL
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@Frank Harrington, it comes down to what would make the most financial sense to you personally, like @Caleb Brown mentioned.
I can't even begin to imagine the taxes on a CA flip!!!!! If you went the house hacking route, you would have the opportunity to take advantage of the primary residence exclusion if you have lived in the property for two out of the previous five years you've owned the property as your primary residence. And, since you'd only be renting out rooms in the main living area, it would still all count as your primary residence sale - $250K of profit tax-free, and no need to do a 1031 exchange.
If you were going to have more than the max in tax-free profit, or maybe build an ADU or something like that, you could separate the rented areas out and even depreciate them for tax purposes. This way, you would take a % of the gain tax-free and defer the additional tax left over in a 1031 exchange if you wanted. This is a strategy investors will use to scale quicker since you have the primary residence and 1031 opportunities.
- Dave Foster
