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Updated over 2 years ago,
Land-lording exit plan
Hello everyone,
Looking for a thoughtful exit plan from land-lording. Been at this business for 20 years and there is more to life than wearing maintenance and cleaner hats al the time. This was originally a 5 year plan however covid, cost and purchase availability have extended the timeline. Thinking others here have gone through this phase or maybe thinking about for themselves...what would you do? Pros/Cons? What other ideas are there?
Data Points
• Partner and I are gainfully employed, no children.
• Considerations of retiring early (next five years.)
• Goal to minimize tax obligations
• Post full retirement, keep reportable income to a minimum until retirement age.
Part A - Primary Residence
Main component of the plan is to purchase a forever home, ideally wanting some type of duplex such as cape cod so some of the expenses are covered over time. This would be via 1031 exchange, renting out out for a few years as we plan the move.
Pro - place to live, provide a home base to be between travels. If a duplex, expenses minimized and know the place will have someone around as we travel.
Con - if rented income from having 1/2 of the duplex rented (and additional income from properties we decided to keep.)
Part B
We have other investment properties and deciding which/if to keep longer term...less maintenance and day-to-day. What else?
One idea is to 1031 them into a REIT (think Fundrise/CrowdStreet.) One ‘featured benefit' such companies promote is the ability to bring over/match the debt ratio such as a given mortgage on the relinquished property - not clearly understanding the full value of the debt in these situations.
Pros - available 1031 opportunity with no land lording day-to-day
Cons - TBD reported income on quarterly/annual basis.
Select a property or two to sell off raw - take the Uncle Sam lumps on the chin.
Part C
If we end up with windfall, how do people invest w/minimal tax obligation beyond say a Muni mutual fund? Tax efficient strategies to invest aftertax dollars for the long term.
Part D
We have been approached by someone interested in purchasing one of the investment properties. Fantastic we said AND we have been actively looking for 4 years for that forever duplex or smaller single-family home w/o success. This particular property would need to be 1031. We have kept our eye on other investment properties as well which have been few and far between and we wouldn't be up to sell one great investment to pick up others when we are looking to gracefully exit.
The REIT option above could work, doing a 1031 exchange into the REIT. Given we are both gainfully employed any additional reported income would be an unwelcome risk to tax brackets.
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Side note - this text field is quite buggy on the iPhone iOS 15.xx