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Updated over 2 years ago on . Most recent reply

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15
Posts
15
Votes
Joan MacDonald
15
Votes |
15
Posts

Options for holding cash profit from sale of real estate

Joan MacDonald
Posted

Thinking of selling a residential duplex investment property in CT. A sale would yield $250-300k profit. Owned it for 5 years. I have a commercial mortgage on it in the name of my LLC that I also personally guarantee (as per the loan docs). That's the only debt on it. I'm the sole member of the LLC. I'd like to buy another property within a few years using the profit. What vehicle can I set up to hold this money so I avoid cap gains tax? I know that SDIRAs, etc take time to set up and that's fine. Just looking for what options there are given my details.

For context....
Net rental income on this property is $6500/mo. I have no retirement account. I have no W2 income. I operate a small nonprofit (an actual 501(c)(3)) in the education field. I have a 2nd LLC set up for other business income but haven't had income on that since 2020. I own my own house around the corner (also a duplex) and it's in my name (no LLC.)

My reasons for selling: 
A) prices are up,
B) my elderly parents need me and this house takes all of my time as a diy-er,
C) property management is 15% or more near me + it appears they only collect rent / execute leases; repairs would still require my energy, 
D) labor shortage means no reliable, skilled, sober handyperson to do upkeep that I do now (tile bathroom, paint a room, etc)
E) a cashout refi will not solve my problems- see B

Most Popular Reply

User Stats

18
Posts
13
Votes
Joe Almeida
  • Real Estate Broker
  • Bridgeport, CT
13
Votes |
18
Posts
Joe Almeida
  • Real Estate Broker
  • Bridgeport, CT
Replied

You either have to do a 1031 Exchange which means you will need to purchase another "like kind" property that throws off rental income, and do so within the IRS allowable time frame, or you may want to consider selling the property and holding a mortgage for a few years (3-7).  You would want to speak with a good accountant (preferably a CPA) and discuss the money up front from a buyer.  Now you let the new owner take care of management, repairs, etc.  You get your payment and pay taxes as you receive the income.  Since you presently don't have W2 income, you may be in a good tax bracket to make this a great move.

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