Park cash till correction or 1031

[Ed Caldwell]

Process of cashing out a long ten rental. Great time to sell! That said, I can’t seem to find a decent multi family to roll onto at a decent cap rate and lock on the lower lending rates. The option of to pay the tax and park the cash till the correction coming and buy back in at better prices for cash flow. Thoughts?

[Bill B.]

As long as you’re willing to never invest in real estate now a good time to sell without a 1031. 

My explanation would be with income tax, selling costs, and depreciation recapture you’re probably going to need a 20-30% price drop to get back to your exact same property with your net proceeds? 

That ain’t happening in our life times. It’s already happened once in the last 200 years. 

Let’s say 5 years from now prices do actually drop 20%. By then they will be up somewhere between 20 and 40% from today’s prices (4-8% yearly) IF inflation doesn’t kick in otherwise the sky’s the limit. So 5 years from now prices drop to just a little more than today’s prices. But, you’ve lost out on 5 years on rental income and paid the 20-30% in taxes/selling costs. So you’re down 30-40% from where not selling woulda put you. Are you saying you’re going to have the integrity to say selling was a really stupid idea and a big mistake. I guess I’ll buy properties for more than I sold them for. Or are you going to sit out another 20 years waiting for them to be less than what you sold for?

I don’t see how any non-1031 sale is better than a 75% cash out. You end up with about the same amount of cash and you still own the property. If you truly believe ANY property you own will be worth less in 20-30 years, yes, of course sell and leave that market. Otherwise take the cash out loan if you’re itchy about short term future values.