Where to buy now

Question

Hey guys

We do have rentals and we are rehabbing one to sell. So my question is where should we put that money now from the sale?

We were looking at possibly trying our luck and flipping land near where we currently live.

Any ideas or opinions would be greatly appreciated

Thanks

Lin

Alecia Loveless · Answer

@Lin Gowan By staying in frequent touch with my realtor and looking at the MLS almost daily in my preferred markets I have found some great deals in the past 8 months. One through a pocket listing from the realtor and then the other one I scored from the MLS. Both I had to be pushy to get my offer accepted on but it was worth it.

I understand a lot of people swear by OOS investing and moving to other markets to get better deals but your particular market is going wild right now and I anticipate it’s continuing growth well into the future. If I were you I’d look for deals either locally or in surrounding areas where I’m sure expansion will occur.

I grew up in city of 60,000 people an hour north of Dallas and Ft. Worth. Today there are 300,000 people there and houses that were $60,000 15 years ago are now $400,000. I anticipate areas around Boise will continue to appreciate like that in the coming years although maybe not quite that much.

Travis Timmons · Answer

Invest where you have subject matter expertise and an unfair advantage. If you have had success in one area of RE, keep doing that thing. Don't get cute.

And don't let the prospect of a 1031 and deferring taxes dictate your next investment. Buy the best deal you can find, not the one that limits your tax exposure the most (if those two are the same, that's amazing, but don't let a tax bill dictate your entire investing strategy).

Dave Foster · Answer

@Lin Gowan, There's several ways to tap that profit and deferred tax.

1. Refinances - Take the cash tax free.  Let the tenant pay the mortgage.

2. Convert into new primary residences - Then sell and get a partial primary residence exclusion - tax free.

3. Put the equity to work (think of the power of simply taking the deferred tax and buying cash flow and yes, live off the cash flow.  slowly convert to passive investments (either managed for you, or NNN commercial, or completely passive Delaware Statutory Trusts).

4. Let your heirs take over management and give you the cash flow ahead of your death.  When you die the tax goes away because you get a step up in basis.  so there is motivation to keep the properties in your name until you die so they can inherit tax free.

5. 1031 into that beautiful vacation home (or two) that you want to spend time in during retirement.  Use the 1031 for that as well as some short term rentals.  Make money off your vacation property.

6. Sell in an area of high prices and buy more properties in places where appreciation hasn't caught up yet - more properties more cash flow.

Some of the opportunities :)

Lin Gowan · Answer

I am curious with the equity built up when its time to retire how do you use that equity at that point?? Or are we just trying to live off rental income??

Mohammad Parwez · Answer

It's always better to check for the deals in your own backyard before looking elsewhere.

However, some markets are way overpriced and you may not be able to enter the market. As saying goes you make the most money on your entry.

1031 is a great way to defer your capital gains but it is a little complex to manage and get done in short time. I was lucky to get one property sold and park my gains to another investment property using 1031 exchange last year.

There are some good opportunities in the NC triad area as it is growing rapidly.

Regards

Mohammad Parwez

NC Realtor

Dave Foster · Answer

@Lin Gowan, holding and flipping are very different investing structures.  Right now you've probably got long-term capital gains treatment for your rentals.  As soon as you convert those into a flipping business of any kind you'll move into ordinary taxation of your profits.  That requires a much higher rate of return to equal what you're giving up in additional taxation.  Not that it's wrong.  But you have to figure that into your equation.

A traditional path for long-term investors is to 1031 into different classes/amounts/locations of real estate.  So you've got a valid search going on.  Find the best real estate in the best location and do your 1031 into that as @Travis Timmons said.  The 1031 is plenty flexible to allow you to go into any type of real estate anywhere.  So no need to do something just for a tax benefit.  Do what is best and enjoy the extra benefit of indefinite tax deferral.

That's what you lose if you take these profits and move into a flipping structure.

Lin Gowan · Answer

Boise

Henry Clark · Answer

What is a town near you?

Nathan Gesner · Answer

I would look for Dave Myers on the BiggerPockets YouTube channel or in the BiggerPockets blogs. He is regularly evaluating markets across the country and giving advice as to which ones are the best to invest in for the near future.

Lin Gowan · Answer

is there a way to delete one of them?

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