Sell both properties in LA or not?Any Tax Strategies to offset capital gains?

[Kat Hughes]

Hi!

My husband and I are potentially making some big changes in our living situation in the next 3 - 6 months.

We have a multi unit property in North Hollywood. A 3bed/2bath front home and a 2bed/1.5 bath duplex behind. All these three units are renting at below market value. We used to live in the front house and we're now in Sylmar at a 4bed/2.5bath townhome that we purchased in 2021.

So basically, one is now turned into an investment property and the other one is our home. We're thinking of selling both and moving to another state.

The North Hollywood home is valued at 1.5M and we owe 720K on it. The Sylmar home is valued at 570K and we owe 470K on it.

Our issue is the capital gains tax. And if we do 1031 exchange with the N. Hollywood home, the property we purchase in exchange of that will need to be an investment property since it has to be a like kind property. And the sylmar home, we can either sell or rent it out in LA while we live at another state.

If we sold both and just pay the capital gains, I think we'd still have enough to put a significant down payment on another home somewhere else and have enough left over to put into savings and perhaps even capital to spend to grow my existing business (online piano studio business). My husband can potentially take a year off from work to figure out what he wants to do next, or even just help me build my business.

Our biggest fear is moving away from my mom, dad, aunt and uncle who are all in LA and are in their 70's. I am their main caregiver and moving away would be very difficult. Technically, I'd want them to move with us but they are die hard LA fans who I can't pay enough to move with us. :(

What are different scenarios and options would you think of? What would you do in this situation?