Need a RE Tax Strategist & Mentor & Possibly Partners

1031 Exchanges
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Need a RE Tax Strategist & Mentor & Possibly Partners

Jennifer C.
Investor · Denver, CO · Member since 2015 · 30 posts · 19 votes

Hello Big Pocket People,

My husband and I own a 2-Family property in Brooklyn NY. We have one more year before losing our cap gains exclusion. We moved to Denver for my husband's job two years ago.

The appreciation in Brooklyn has been pretty insane. I'm just gonna say I, rather than we, since I'm the real estate junkie in the family. If I pay taxes on the gain we'll probably clear about 800-900k. If I do a 1031 the money is probably somewhere north of a million.

The house has been earning a strong return as 1/2 Airbnb and 1/2 LTR and we have been depending on the income since I quit my day job and we had to take on tuition for my son's schooling (non-optional I'm afraid). I guess i would just keep going that way if I was sure that I would be able to keep Airbnbing forever. It's currently legal for me, but who knows if they will change the laws.  

I feel like we have some very big decisions to make pretty soon, and I really don't feel like I am informed enough to make them. I am in need of a 1031 Advisor, tax advisor, and I could really use some mentorship. I love real estate (I was an agent in New York) and I could use guidance. I'd love to work with someone who is active in the Denver market. 

Thanks in advance for your advice,

Jennifer C.

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Matt M.
Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
8y

I used Tracey Wilson at IPX1031 in the past. IIRC he is also a CPA. If you are dependant on the income, why don't you just let it keep rolling? 

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  • Matt M.
    Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
    8y

    I used Tracey Wilson at IPX1031 in the past. IIRC he is also a CPA. If you are dependant on the income, why don't you just let it keep rolling? 

    1Reply
  • Jennifer C.
    OP
    Investor · Denver, CO · Member since 2015 · 30 posts · 19 votes
    8y

    That's one of the possibilities on the table. If I sold, one of the options would be to pay off our primary residence here in Denver. Not a great return, but then we don't depend on the house income for our son's tuition, and also have some money to put elsewhere. Times feel uncertain, and having a paid-off house feels like a pretty good hedge if/when the next downturn comes along. 

    On the other hand, as far as long-term appreciation goes, Brooklyn is about the best bet there is. But, I'm concerned about our current cash-weak position. I could get a day job I suppose, but as a middle aged mom who hasn't worked in a while, I'm not sure how much I can pull in. I don't exactly have a career path to go back to. I'm entrepreneurial, so the idea of getting back into the real estate game is appealing, but also fraught with pitfalls. 

    1Reply
  • Llewelyn A.
    Investor / Broker · Brooklyn, NY · Member since 2016 · 665 posts · 1k+ votes
    8y

    @Jennifer C.

    Hi Jennifer! Glad to know another Brooklyn Property owner!

    There is a lot of uncertainty at the moment, especially with the Tax Reform Proposal that has been approved by the House and Senate, but has to be reconciled soon.

    One of the provisions is to expand the Capital Gains Exclusion which allowed you to not pay Capital Gains Tax on the sale of your home up to $500k of Gains if you lived in it for 2 years but owned it for 5 years.

    The proposal would change this rule to live in it for 5 years and own it for 8 years.

    I'm not sure if the old rules would be grandfathered in and then the new rules would just apply to new purchases, but if you wanted to take advantage of the Capital Gains Exclusion on the Sale, you may need to revisit your strategy in light of the new tax proposal.

    In regards to getting back into work, I believe Colorado has reciprocity with NY for your License. So I am assuming that all you would need to do is find a Brokerage in Denver and apply for reciprocity.

    Just a few suggestions.

    0Reply
  • Matt M.
    Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
    8y

    You could also pay off your home and look at a heloc for investing. You could do some hard money lending here, flips, etc with your background. 

    0Reply
  • Jennifer C.
    OP
    Investor · Denver, CO · Member since 2015 · 30 posts · 19 votes
    8y
    Originally posted by @Llewelyn A.:

    @Jennifer C.

    Hi Jennifer! Glad to know another Brooklyn Property owner!

    >>Hello Llewellyn. Nice to meet you.

    There is a lot of uncertainty at the moment, especially with the Tax Reform Proposal that has been approved by the House and Senate, but has to be reconciled soon. >>

    Yes. Don't I know it.

    One of the provisions is to expand the Capital Gains Exclusion which allowed you to not pay Capital Gains Tax on the sale of your home up to $500k of Gains if you lived in it for 2 years but owned it for 5 years.

    The proposal would change this rule to live in it for 5 years and own it for 8 years. 

    >>I'm aware of this and definitely concerned. I would hope there would be some grandfathering. I also read that there could be an exception if you had to move for work, which we did.

    >>As far as going back to being a real estate agent, I certainly could. My license had been expired too long for reciprocity, but I'm an excellent student, so having to get it again. Would not be a big deal.

    1Reply
  • Lumi Ispas
    Real Estate Consultant · Chicago, IL · Member since 2014 · 720 posts · 439 votes
    8y

    @Jennifer C. , what a wonderful problem to have. :) What if you can keep your beautifully growing asset and amazing cash flowing property and just get a line of credit to use for investing or to pay off the Denver property?

    Also, as Plan B, in case you can't AIRBNB the property any longer at one point in the future, if you have to rent it to market rent, will the rent cover the total expenses of the property?

    Regarding earning extra income, with your love for real estate, empathy and multitasking skills earned as a mom, I believe your best bet will be to get your real estate license. 

    Good luck to you!

    0Reply
  • Lumi Ispas
    Real Estate Consultant · Chicago, IL · Member since 2014 · 720 posts · 439 votes
    8y

    @Jennifer C. , one more thing, you can always to a 1031 Exchange...

    1Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    8y

    @Jennifer C.
    is the $800k-$900k and 1 million amounts after paying off any mortgage(if any)?

    What is your rental income after all expenses?

    I love brooklyn(raised and currently living here). I would have to assume that you can achieve greater cash-flow if you sold/1031'ed the property and invested elsewhere. The issue you have is that Denver is also a hot market where property values have skyrocketed.

    Have you looked at areas near Denver that cash-flow well?

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    1Reply
  • Jennifer C.
    OP
    Investor · Denver, CO · Member since 2015 · 30 posts · 19 votes
    8y
    Originally posted by @Basit Siddiqi:

    @Jennifer C.
    is the $800k-$900k and 1 million amounts after paying off any mortgage(if any)?

    What is your rental income after all expenses?

    I love brooklyn(raised and currently living here). I would have to assume that you can achieve greater cash-flow if you sold/1031'ed the property and invested elsewhere. The issue you have is that Denver is also a hot market where property values have skyrocketed.

    Have you looked at areas near Denver that cash-flow well?

    Yes, those numbers are after paying off the mortgage. And yes, Denver prices are high and climbing. Glad I bought something here too when I moved. I'm investigating all options. I just wish I had more expertise in this. I will be calling 1031 advisors but could very much use the help of someone who can help me analyze the income and tax ramifications of my various options. I'm pretty much operating in a vacuum right now.

    0Reply
  • Jennifer C.
    OP
    Investor · Denver, CO · Member since 2015 · 30 posts · 19 votes
    8y
    Originally posted by @Lumi Ispas:

    @Jennifer C. , what a wonderful problem to have. :) What if you can keep your beautifully growing asset and amazing cash flowing property and just get a line of credit to use for investing or to pay off the Denver property?

    Also, as Plan B, in case you can't AIRBNB the property any longer at one point in the future, if you have to rent it to market rent, will the rent cover the total expenses of the property?

    Regarding earning extra income, with your love for real estate, empathy and multitasking skills earned as a mom, I believe your best bet will be to get your real estate license. 

    Good luck to you!

    Indeed. I am very lucky and grateful to have this problem! I already have a large line of credit on the house that I used to purchase a primary residence here, then refinanced into a 30-year fixed. 

    I would actually love to AVOID being a real estate agent again, if I can help it. It's not a very stimulating career. 

    0Reply
  • Lumi Ispas
    Real Estate Consultant · Chicago, IL · Member since 2014 · 720 posts · 439 votes
    8y

    @Jennifer C. I can understand why you feel that way about your license. Sometime when investing, being licensed doesn't help with sellers as you are always perceived as very knowledgeable. 

    Good luck to you, and reach out with any questions!

    1Reply
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