I don’t agree with the bull thesis on Tesla but I really admire your long term dedication. And you have the result to show for it. That’s what counts.
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May not even be possible to time the market. But sitting tight for 10 years while your portfolio is barely treading water is really tough psychologically. The urge to “do something, anything” is super difficult to resist.
@manch
After selling your rentals what did you do with the proceeds ? 1031 into DST ?
@Elt1
Same question - DST locks things up
Asking because am in the same boat got out of state rentals and want to roll the gains
Thanks
Or, do what I am doing now, exchange into a property that you ultimately will want to live in. Do the exchange, rent it out for say 2 years minimum and then move in. That way, cut your capital gains the longer you stay. You stay until you pass, let your heirs worry about any taxes.
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Can you pls explain this part? Thanks!
Well, remember, after you move into your prior rental home it becomes your primary home now, correct? The IRS caught wind of this back in the day of flippers taking the full 250/500k capital gains exclusion with maybe as low as only 1 year’s time, so they closed this loophole or strategy The years that you rented out the property immediately after the exchange (you have to, rental to rental) are never in the calculation. So if you rent for 2 and lived in there for 3 years you get 3/5 or 60% of the capital gain max exclusion. Which, is better than nothing right? Otherwise, had you sold the rental property outright your capital gain tax would have been way higher. Going back to that example say you continue on and live there 8 years out of say the 10. Well, 8/10 equals 80%. 80% > 60% due to the more years you live there. You will never get technically 100% but can get close if you live there long enough hypothetically.
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I saw after death, heir don’t have to pay the tax. Is it true?
That one, I would check with a CPA…
I am not sure in a situation like that where it was an exchange property originally would the step up in basis override all.
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Then why do you still want to rent it out after doing the 1031 exchange? If you live there right after, shouldn’t you get to optimize the capital gain exclusion?
Uh, because that is how the 1031 exchange rule works. Rental must transfer to rental. If you literally move in after exchange IRS will probably void your exchange and you will be paying full capital gains tax on the initial sale. So, you rent it out for the minimum 2 years or so. Why risk it, right? Do it the right way and you get a piece of the pie. That, is all one can expect.
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May I ask what’s the main motivation behind it? I am holding my rentals especially because i refinanced them at 30yrs 3.0 interest rate during pandemic. I assume most of property owners did the same thing as well. Just curious what motivated people to sell properties with low interest rate. Difficulty in collecting rent payments? Tired of rent control? Concerned on long term investment return?
I suspect the difficulty of now getting insurance coverage (and expensive at that) for commercial buildings you can add to the list as to why we mom and pop owners are leaving the industry. Besides, we don’t live forever. Time to enjoy some of that mooola!!!
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I sold the properties in farther away locales but keep the ones closer by. Managing my properties through professional property managers has proven to be quite costly and rather frustrating. They usually do a pretty bad job at tenant selection. The incentives work against owners.
I am also more confident on my maturity with handling stock investing. Older now, more stable psychologically and less impulsive. I still think the best part of RE is the forced saving. It’s a hassle to sell so most just buy and hold for the long term. If one has the same psychological toughness to resist temptations and do the same with stocks, stocks will outperform. But that is a huge if.
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Thanks for the reply. I was wondering if I am the only one who is not seeing bearish RE market in the long run. 
I am not bearish on RE at all. Bay Area RE will do spectacularly well. I am amazed there are still tons of buyers out there with rates this high. The amount of wealth in the Bay is mind boggling.
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Well, I was driving home from Costco on Saturday afternoon and noticed an Open House sign relatively close to me in San Bruno. I have to stop and look of course. HORDES OF PEOPLE!!! All mostly young professional couples. Mostly Asian, of course. It was all original, so fixer, but priced well, just over 1M. It should go maybe 1.2-1.3 for a practically all tear down internally. We don’t need to worry just yet. SFHs are so much in demand!!!
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Supply limited. LT should be up. The long term price appreciation of 6-8% p.a. for BA has not been broken.
Historically is low. Today’s rate is lower than the rate in the year I landed in CA in 2002.
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I calculated that QQQ is up about 5x in the last 10 years, and my bay area home is up about 2.5 times in the same time. Assuming I put 50% down, that increase in home price is also about 5x. But as of today in prime south bay, you will lose about $50K a year on top of your down payment on a single family home purchase of about $2M. Is this the reason you say stocks are better than real estate? What other factors am I missing?
Given the benefits of home ownership and 6-8% CAGR in Bay Area, owning a Primary home is better than rent + QQQ investment.
As for buying a rental in Bay Area, the cost of running a rental is higher than what we compute, we tend to ignore many costs + dealing with tenant is not a joy. The SFH rental in Bay Area is my ex-Primary.
Above comment is based on a timeframe of 20-40 years. ST, dynamics could be different.
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There is a lot of costs that most people don’t count towards owning a house, like property tax, mortgage interests, insurance, maintenance etc. I agree with @hanera, owning a primary in the Bay is great investment. Owning a rental nearby that you can manage yourself is also fine.
For me owning rentals 2 hours’ drive away is not ideal. I’d need to hire a PM and let’s be honest, most PM’s aren’t great. I don’t blame them. Fundamentally PM’s incentives don’t exactly align with owners’.
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