Hi all
Like many of you guys, my investment property in the east bay has increased in value quite a bit in the last 5 years.
It is a duplex and I wish I could keep it and tap into the gains (around 450K) but I’m realizing after many efforts that it is a big pain to refinance investment multi-unit property, the rates are awful and appraisal is a pain due to lack of comps.
My only choice is to sell and do a 1031 exchange and rather invest in SFH so it is easier to do cash out refi later on and also a bigger buyer pool.
Question for y’all - What would you pick ?
put the 450K gains into 1 property, say around 1.5M and buy into a “great” neighborhood - eg SF, Rockridge in Oakland, san jose neighborhoods with great schools etc
splits the 450K gains into 2 properties, 750K each in ok neighborhoods eg dimond/redwood heights in oakland, parts of fremont, or san jose
Well, you are talking about an example that is EXACTLY what I am doing. I am going from an Oakland 4plex that I have had for 25 years and wish to sell for life balance reasons more than anything but I don’t want to pay Uncle Sam for all that sweat and tears from early Oakland days hell. So, I am exchanging to a westside SFH so that the Mrs and I can move into after renting out and thus try to wipe out a huge chunk of the capital gains (otherwise owned if sold outright). So, in your example, not sure the duplex scenario would fit my goal (i can’t live in 2 properties). If you can move in like I am doing after renting for a number of years option 1 is what I would pick of course.
wow - that is an even better idea, I didn’t even think about the possibility of moving into a 1031 exchanged property…definitely some fodder for thought - Thanks!!!
Now, if you are like me it works fairly easily since no rug rats to worry about (schooling etc.) but of course my wifey has to put parameters around it, like has to be north or at Millbrae and cant be east bay. Well, that only leaves a few cities for me… Look into it, can be done but takes a few years as you can imagine…
Again, need to follow the rules: rental to rental so that means prob renting whatever you buy for say 2 years. Boom you move in and hang out for a number of years. Then you sell and move back to your once primary (which you prob will rent out as you live in 1031 prop). Of course, need to be mindful if you had planned to sell primary so that you don’t go beyond window of that 500k exclusion (or I guess you will have to start over again at the primary).
The 45 day window for 1031 exchange scares me a bit to find a house I love especially if it is something I want to move in later…What has been your experience so far on that?
Here’s my question: what if I have 2 separate properties (say worth 500k each) that I want to 1031 exchange into one property (say worth 1M). How would that work? Is that even possible and do I get more than 45 days since it’s a more complicated transaction…
Ok, you hit on the main issue which is where I am at now. So, one can do a reverse exchange. You buy first and then sell the exchange property. Costs more, involves an intermediary. Now, that also means you have to have the dough upfront to buy the replacement. If not, have to get it from hard money lender. @Elt1 gave me a referral (thanks @Elt1) but I am going to try to wing it another way if I qualify for enough. My primary home has at least 1M in equity. I am going to try to tap that via an equity promo my Tracie told me about that is a great deal. If the bank gives me an equity line of 1M or so, we have enough cash to make up the rest of the purchase with cash. I then can in theory take my time to sell the exchange property (within 180 days).
No way in heck the 45 days will anyone find and lock down a property. I am still trying though via private offerings way so that I can negotiate with seller and I will give him a premium to work with me to do a normal exchange.
Yes, still like kind and as long as you in general buy for a single property that is more than both properties sell for you should be good in general. Nope, 45 days in a straight 1031 is all you get baby. That is why it is tough. I am willing to pay the 5-10K for reverse exchange so that I get my dream house first. I can sell the exchange property at my sweet time. Takes cash though…
I believe it is the same as straight exchange, that 180 days max. Sounds like you have the front money to play a reverse. Be warned, costs a lot more since essentially you are doing two closings. They say 5-10k instead of maybe 1k in straight exchange. The end property is held in title via LLC I believe with intermediary on title. Essentially the intermediary transfers the property to you after selling the exchange property.
I’m in the middle of reverse 1031 exchange ( just closed on my replacement property last week ). One of the challenges is that the title will be held by an intermediary LLC and and have to be borrower for that loan and the loan doscs needed to include "non-recourse language for the intermediary LLC "…therefore no lender agreed to it and I had to buy it all cash. The reverse exchange costed me about 5K and the cost of the new LLC and 2 tax returns since my 6 months would span 2 years.
Hmm the more I’m reading about this 1031 exchange it sounds stressful
Might just do a cash out refi with a higher interest rate and after 6 months just do a simple refinance without cashout to get a lower interest rate.
Also hate the thought of paying seller commission and losing my prop13 benefits for low tax…
Thanks for chiming in @cloud. You are the perfect person to ask about this stuff then. Who are you using for your intermediary? Would you recommend? All in all though, would you do it again as opposed to a straight exchange? I am thinking you wanted to do a straight one but due to all of the reasons we mentioned about the market that it wasn’t feasible. I still have to believe it was worth it because I would a wreck trying to identify 3 properties and locking one down in 45 days.
My Tracie did not have one lender who did it. So, she pointed me to her contact at US Bank who told me of a killer promo deal going on right now. Totally free and get this, the rate for 6 months is 1.99%!!! Way longer than I need it for. God, approve my appl and give me over 1M baby!!!
