Capital Gains - To sell or to hold?

[John Schutt]

Hi all!

I bought a C* B- 8plex 18 months ago via 1031 exchange with a plan to fix up units, raise rents, and possibly sell in 3 to 5 years.

Got a call from an investor with an offer $100k over what i paid for it just a year and a.half ago.

Question is, do i sell and pay $75k in cap gains from 1031 and deprecuation, or hang on, rehab units and sell in a few years?

Feel like next administration will be raising cap gains tax, so is now the time?

thanks in advance.

John

[Bernard Reisz]

@John Schutt Great suggestion @Natalie Kolodij and great 1031 insight from @Dave Foster (as always). 

Although the fact pattern for another 1031 would not otherwise be optimal (not to imply that it would otherwise preclude another 1031), the presence of an unsolicited offer makes this a great 1031 opportunity. 

Of course, never let the tax tail wag the investment dog - as pointed out by @Bill F.. Key here is to analyze all potential outcomes, while accounting for all variables. The 1031 approach, though, is not purely a tax play, but more of a real estate financing play. When using a 1031, you are essentially getting the US Treasury to finance your way into bigger deals - interest free! (There may be a balloon payment somewhere down the road, though.)