Would you do a 1031 Exchange if you were in our shoes?

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You might want to talk to your accountant again, or a new one. You seem to have some weird numbers. Take what you sell for net (after closing costs) say $360k in your case ($20k in commissions and closing costs of only 5%) and you paid let’s say only $160k, making a killing on your investment. So then you owe 15% max on the $200k profit, or $30k in taxes. You could also owe a few island in depreciation recapture but I don’t see anyway you could owe $80k. Even if you only paid $1 for the condo and owed 15% on the whole $360k, that’s less than $50k. So you’ve got a problem there. IF you already have something in mind you want to buy then of course you do the 1031. But you have to figure out your real savings first. If you paid $300k for the property your taxes are under $10k. This would also be a chance to sell in a state with income tax and buy in a state without income tax if you think you’ll sell it for a profit in the future. NM. I just saw you’re in California. They’ll come after you and your money even if you leave the state. So just focus on how much is really owed, do you have something you want to buy and can find within 45 days and close in 180 days.

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Have you considered Delaware Statutory Trusts? They're investment vehicles for 1031 exchanges where an investment company operates the real estate in the trust and the investors are the trustees. They allow investors to be invested in real estate without having to deal with the maintenance and tenants. The investment companies pay out the distributions either monthly or quarterly, but usually monthly. Maybe this could be a solution for you? I could message you with some more information

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I was explaining how good your return was even if you made nothing for the last 12 years and paid all the taxes this year. Assuming you actually made profits for the last 12 years your return was even better. MAYBE her tax estimate include all your regular rental income for the year as well? Or maybe even all your regular w-2 income as well? The $14,500 in expenses would only save you a few thousand off your rental income and should have nothing to do with the sale unless they were capex in which case they would only save you 15%.

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I don't know how, but my accountant is calculating that I would owe around $45K to the IRS and around $26K to CA. But that's only $71K and she said I would owe closer to $80K... I also have $14,500 in repairs this year I can apply against taxes and I asked if she factored that in and she said "yes".Also, where are you getting a $30K downpayment and zero while I owed the property? I wasn't getting that part...Thanks!!!

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The numbers I come up with:You sell for $380k minus commissions of $22,800(let’s say 23k) minus $17,000 in closing fees and concessions!?!? (This seems INSANELY HIGH.) means you net $340k after commissions and costs. You owe $96k so you could walk with $244k… You owe capital gains taxes at an assumed rate of 15% on $340k minus $130k or $210k. So that’s $31,500 owed.). Let’s pretend you depreciated the entire property with no land value as part of an Hoa/condo. So you wrote off 3.636% of $130k per year, ($4727) times 12 years ($56,727) so you owe 25% on that ($14,181). So I come up with $45,700 owed in taxes (plus California’s grab) and you walk with $198k give or take (minus California’s grab.) You can get a $46k discount (plus California’s grab) off any investment property you could identify in 45 days or less and close on in 180 days or less as long s it costs at least $340k and you put down at least $244k. That’s a pretty healthy discount if you can find something. Otherwise assuming a $30k downpayment or less you still did ok with a 550% return after taxes in 12 years if you made zero while you owned it. (Almost 18% annually) PS. I’m NO accountant, and I don’t pay state income tax. So maybe I’m waaaaay off. But if I’m not really far off you really need a different accountant.

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For clarity for those questioning the numbers... I re-did the math. I'm not sure how my accountant came up with $200K net to me after taxes, based on my breakdown below. I am coming up with $164,200 after taxes or $244,200 rolled over. Does this change anyone's thoughts?Total Sales Price = $380,000Less $96,000 owed on mortgage (Condo was originally purchased at $130K)Less $22,800 for the realtor fees of 6%Less $17,000 for estimated closing costs and other fees and concessionsLess $80,000 in Taxes (Taxes include depreciation taken over 12 years, plus capital gains taxes)= $164,200 Net ProfitOr $244,200 rolled through a 1031 exchange into the new property.

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What's your overall plan? If it's to continue to buy & hold, why not continue to do that - regardless of whether the 1031 works out?I would make sure the new property is one you'd still buy even if the 1031 option didn't exist - it's got to feel like a lot of pressure when you're trying to complete the 1031 on time. Does anyone have any experience with this type of thing? https://www.1031exchange.com/d...

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@Adam Purden I need to question your accountant on your numbers. Did you buy this condo for $100K? If so, they are correct, but if not, you need to take the purchase price minus the sales price, minus expenses to figure out your capital gains tax.To answer your question, I would recommend a 1031 exchange, but remember you have only 45 days to identify a new property.Good Investing...

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I have been working under the impression depreciation is transferred to the new property. The cash boot then is taxed at normal individual tax rates, not capital gains nor depreciation recapture rate. I've heard it is a multi-step issue for the facilitator and your CPA, so may be better to do the exchange with a property of at least equal value, then do a post exchange refinance to get $$ out. Correct me if I am wrong.

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@Adam Purden It usually depends on your long term goals. If you don't really need the cash now or in the immediate future, you may as well exchange and defer. That bill will eventually catch up and could potentially be an even higher rate if you depreciate the new asset in the future, so do be careful with cost segregations if you do exchange it. If cash flow is the imperative, you can always try to find something that either just performs better or can be bought free and clear.