Buying/living in 2 flip houses
HELP!!
We bought 2 investment homes and now are having trouble with the technical parts of it!
My husband is a contractor and we decided to buy 2 houses that were cheap and flip them. (The one house was $95k and the other was $120k, both from the same seller- who is a family member- in a subdivision) At the time, we couldn’t get a loan for the $215k so we have a note with the seller. The houses are now worth over $250k each. We are living in one and in the middle of construction on the other. We have lived in this house for a year now. How do we go about selling these to avoid Capital gains? What’s the best way to do this with lending/title co./ etc.. do we do quit claim on one and 1031 the other? Every time I think about it I STRESS!!! Help please!
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#3 Personal Finance Contributor
- Rental Property Investor
- Denver, CO
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#3 Personal Finance Contributor
- Rental Property Investor
- Denver, CO
Interesting. Thanks for sharing, and welcome to BP, @Faith Roy!
I don't have a lot of specifics of your sitiuation, so I'm going to make some guesses.
First, how long have you lived in the one property? After two years, you can sell it, if it's your primary, and exclude capital gains. That's a great exit strategy if you are comfortable in the place. If you aren't you can suck it up and travel for 6 months out of the year, and rent it out on a short-term rental basis. Just make sure you occupy it enough of the year so that you can call it your primary residence.
Same deal with your other property. If you hold it longer than a year (might be two years - hopefully someone corrects me later in this thread), and rent it out, you will likely be able to get long-term gains, not short-term gains on the property.
Your "exit options" for either property are:
- Sell it (either short-term as a flip)
- Rent it (either short-term rentals, or long-term rental)
- Live in it
A 1031 exchange may be an option for one - perhaps @Daniel Hyman can chime in here on that.
