All Forum Posts by: Kyle Kadish

@Lauren Perry great questions, and good position to be in.  While I am a huge fan of 1031 exchanges and many of my clients use them, @Corby Goade has a strong point on keep the cash flowing property in Portland. Yes, the market has risen, but it is close to you and easier to manage with your full-time job. Every other market (Detroit, Indianapolis, etc) not only is remote from you, but has different dynamics on rentals (is the greatest opportunity a SFR, or duplex, or 3-/4-family?).

I have heard of options using installment sales that might be able to rescue the exchange after day-45.  Some QI's are friendlier to this option than others.  It is not as clean, but still allows you to defer tax payments on gains (and recapture).

If your daughter rents from you and pays rent, it is an investment property. The rent will need to be a 'fair-market' rent, i.e. is it equivalent to what a non-related party would pay, or a similar rate as other SFR's in the area are charging.

Additionally, for further proof of intent as an investment, it is never a bad idea to have a lease agreement with your tenant, whomever they may be.

As @Gregory Hiban mentions, he must be selling investment real estate. As to personal use, the calculation can be confusing....I'll try to simplify it. Personal use can be the greater of 14 days or 10% of investment use. Example: You rent a beach property out for two months in the summer, you can use it for 14 days. If you rent the property for nine months (270 days), you can use it for 27 days.

@Debora Monteiro, the tax code can get confusing quickly - especially if the property was owner-occupied for any portion of time.  @Dave Foster's suggestion of a 1031 exchange might is worthwhile to consider - even if you look for property to rent out today that you may eventually move into down the road.

A 1031 exchange is not right for everyone, but when comparing the numbers...

Option 1: Have a larger asset base to work from and reinvest in income producing properties (via 1031 exchange), or

Option 2: selling, paying taxes, and investing in the stock market (which may or may not be paying dividends).

An exchange can also be thought of as an interest free loan from the government - you only pay the taxes when you do not reinvest in like-kind real estate.

You do make a compassionate argument for your current tenants, and that does not go unnoticed, however as @John Warren pointed out, your return is very small.  There are likely better options for you assets to generate a great return.

Great info posted.  The objective is to focus on the dollars, not the properties.  You can sell one and by two; or sell three, and buy one.  What you are trying to achieve is re-positioning the assets to not only defer the capital gains (and depreciation recapture - yet only four years of depreciation in your situation), but hopefully increase cash flow or provide more upside by using every dollar in the sale.

Additionally, the opportunity for investment in 'like-kind' property is expansive.  Focus on the use of property, not type.  A multi-family can be exchanged for commercial, or medical for raw land, etc.  

Most importantly, you're asking the right questions, and knowing before you conduct a transaction.  Exchange Authority in Leominster does good work, and there are other QI's around locally and nationally that can provide the services also.