All Forum Posts by: Bill B.

As a non-cpa non-lawyer, but all around good guy...

I’d say if you separated all 4 properties in to separate property id’s. And paid full boat capital gains tax on the 3 you sold, you should be good selling the last one as your primary tax free up to $250k in gains if single. 

I’m sure you used some experts for the condo conversion, I’d get them on board too. If you claimed any percentage of the other 3 sales as part of the building that was partially your homestead then forget everything I said and be prepared to pay more taxes here. 

Looks about right. The $9k per year the tenant paid off is worth about 9%. The 5% appreciation is multiplied by 5 because you only put down 20%, so that’s 25%. So I get 34% easy. 

Don’t worry, you were alarmed by either bad, misleading, early analysis or maybe just click-bait. If their chart showed sales down 8% for February when the correct answer was plus 12% hard to ever listen to them again  

Try to avoid “news” sites with “ad”(vertising) in the name  

https://www.cnbc.com/2019/03/22/home-sales-make-record-jump-in-february.html

• Sales of existing homes skyrocketed a whopping 11.8 percent in February compared with January, according to the National Association of Realtors.
• That is the largest monthly jump ever, with the exception of a change in mortgage policy in 2015 that artificially pushed one month's sales into the next month.

Make the attorney costs part of the closing costs. Either original seller ends up paying them or you end up with the house. 

@Ryan McDonald

Hey Ryan,

1) If you’re single or have an understanding partner, option 1 is awesome.

2) I don’t see how investing another $150k in to your primary helps at all?

3) doesn’t make any sense, you have to live somewhere

4) is reasonable

5) doesn’t make sense, you have to buy yourself furniture again

6) is a non-starter unless your home is in NLV, there are only 160 legal str’s In Las Vegas and they’re really cracking down on illegal properties with huge fines. (See today’s paper)

7/8) ar basically the same and I wouldn’t do that unless your plan is to retire/move there some day?

If you can deal with option 1, that’s probably the best, my option 2 would be either save up to $60-$75k for a downpayment (or use the heloc, a little riskier) to buy a $250k-$280k dedicated rental with 25% down. If you really don’t like you’re current house, you could do option 4 where you move out but IMHO, to the same price or cheaper home and rent out your current property. Then you could repeat this in a year. 

Yes. Kinda. Take your net sales price minus your adjusted (depreciated basis). That’s your capital gains. Add up all the depreciation you’ve ever taken against all the properties that go you to the date of sale (previous and current). That portion of the capital gains (depreciation recapture) is usually taxed at 25% give or take. The remaining capital gains are taxed at your normal capital gains rate. 

You are in effect paying the capital of all your properties at the end, they are just all stockpiled in the last property you own before sale. Again, the taxes are being deferred, not avoided. 

Ps. Still not a lawyer or a COA, make sure you use a QI like @Dave Foster for the exchange, and a cpa or at least an accountant for your taxes. You don’t want to F this up and you can. 

The total of all depreciation taken is taxed. Usually at 25%. Along with capital gains based on final net sales proceeds minus reduced basis.  (The tax has been deferred, not eliminated.)

Some people have been know to avoid this by...

Dying while still owning the last property (capital gains and depreciation recapture go away.)

Moving in to the last property as their primary AFTER it no longer functions as a rental. (If you sell while still alive you’ll pay recapture taxes and a percent of the capital gains based on percent as primary vs rental.)

When you do a 1031 exchange you carry whatever basis you have left in the building you haven’t depreciated and add it to the amount MORE the new building is worth. You then depreciate that for 27.5 years...

You buy a $120k property. ($20k land and $100k building)

Over 13 years you depreciate about $50k.

You sell for $200k net and buy a $500k property ($400k building $100k land)

You bought $300k more building and have $50k left from first property so your new basis for depreciation is $350k that you depreciate over 27.5 years.

Now that I type it out, an easier way to get to this answer would be just take the new building value and subtract your total depreciation taken so far and that’s your answer. ($400k new building minus $50k taken already equals $350k)

I hope all my renters believe the same thing. Never buy, keep paying rent, you might want to move sometime in the future and it will be easier as a renter. 

@Sam P.

I agree with Dave here. I can’t imagine a CPA not knowing this. Not good, not at all. Even worse, suggesting it, before spending 5 minutes on google to research it