Advice on Whether to Take Profits

[Andrew Gorgey]

I bought two units in downtown Colorado Springs in 2001 for $183,000.  Units are free and clear and together generate $2,800/mo gross.  Realtor approached me to list for $499,000.  Net profits on sale after capital gains and real estate commission is about $360,000 to $390,000.  I'd appreciate comments on whether to continue taking cash flow vs. selling and taking profits.

[Jake S.]

Hey @Andrew Gorgey! Would these still cash flow after a mortgage payment is factored in? If so, keep them and refinance to pull out the equity to go and reinvest. Your refinanced capital is tax free. (Im not a CPA so Id advised getting full advice from them as well)

Otherwise, if you want to be done with properties, sell and do a 1031 exchange so you dont need to pay capital gains tax and have depreciation recaptured, to roll your profits into a larger property (or several similar ones) and potentially grow your cash flow much more.

Or would you rather just take the capital after the sale and be done?

[Andrew Gorgey]

Thanks for the response, Jake.  Yes, I can pull out equity, buy more properties, and keep building.  Or do a 1031 exchange and build that way.  Both are viable options.  Maybe my question is for those who've taken profits and gotten out - how do you know when to get out? To take profits and be done?   If it's as simple as "whenever you feel it's right for you," I'd appreciate hearing that, too.  

[Matthew Ryan]

@Andrew Gorgey - As always, like to pop in and let you know Opportunity Zones are also a great alternative to 1031 exchanges with some more favorable terms. Both have advantages/disadvantages to them but all in all, both good options. Especially if you find yourself attempting a 1031 exchange and not hitting your 45 day window. 

[Andrew Gorgey]

Thanks, Matthew.  I've decided to hold the assets and continue the cash flow, but thanks for taking the time to respond and offer an alternative.  - Drew