selling a house with tenants 11 posts by 5 users

Posted: 10/08/2007 at 06:13AM

I am a new landlady, and don't want to be so for the long term.
For now, the tenants are paying my mortgage. I wanted to hold for at least a year before selling (in case I couldn't find an adequate 1031) to avoid capital gains gouges.

What is the best strategy for selling with tenants living in the house?
I've heard I should have the house vacant and do proper staging.
I don't have the money to pay for carrying costs if it doesn't sell right away.

Any recommendations?

Posted: 10/08/2007 at 11:27AM

I'm not sure I understand some parts of your post:

I am a new landlady, and don't want to be so for the long term

How (and I guess why) did you become a new landlady?

If the property was (until now) your residence there would be no tax on the gain, if 2 of the last 5 years.

If you just bought the place as an investment, how much gain would you even have?

If you just bought it to flip, it wouldn't be eligible for 1031 treatment.

1031 does not eliminate taxes, just pospones them.

avoid capital gains gouges.

Where do people come up with this funny idea that capital gains taxes are " gouges" ? Ideally, it gets preferential treatment (LT), and at worst it is taxed at the same rate as your ordinary income!

As hcf said, give us some more info.

" If" , it's a good rental, it's easy to sell with tenants. If it's not a good rental a " real" investor will not be interested in it as a rental. If you just want to keep some cash coming in while it's on the market, offer the tenant a reduction in rent to keep it in " showing" (exemplary) condition. And a bonus to move when it sells.

all cash

Posted: 10/08/2007 at 01:21PM

It's going to be " cold water shower" time.

You wrote;

but my numbers didn't work well enough to draw potential tenant buyers to the property

and;

I had about 50K+ equity from the get go

Since " tenant buyers" tend to be the " weakest" buyers they are the ones most likely to buy at a price that you can tap into your " equity" . By which I take it you mean profit potential.

If you can't sell it at a $50K profit, then you don't have a $50K profit. And you're currently losing money on a monthly basis.

Oh, and you can't 1031 into a house to use as a primary residence. You have to;

1. Do a " like kind" exchange, sell a rental and purchase a property that you (will want to live in later) rent for a couple of years

2. Then convert it to your primary residence.

3. Then live in for two years, and have a total of five years ownership before it qualifies for the section 121 (2 of 5 years) tax free treatment of the $250K/$500K gain.

In many situations it can just be easier to sell and pay the taxes.

all cash

Posted: 10/09/2007 at 11:30AM

thanks for your input.

Yes, I was thinking of doing a like kind exchange, not moving into it right away, but eventually. That's a great reminder though...

I tried to view the article listed, but the url came back as unable to display.
Please let me know when the article is up and running, or if you're able to cut and paste into the post, that would be most informative.

Thank you!

Posted: 10/09/2007 at 11:56AM

Thanks for the heads up. I just hate those darn trailing periods! Anyway, I fixed it.

Posted: 10/09/2007 at 12:49PM

You are very welcome.