Cashing out of high gain home

[Russell Sherman]

I would like to get opinions to help me determine my best financial options.

I am 59 and last year was forced into retirement and also got divorced.  My settlement was a single family home I purchased for $295,000 in the 1990’s.  The last 8 months it has been rented for $4550.  I just received an out of the blue offer to sell for $1.5M, which is a reasonable offer for the neighborhood.

I hate being a landlord and would like to sell but don't know what to do with the money. I can take $250,000 exclusion and 1031 the rest into…. what? DST's? 721/upreits? Mineral rights? A turnkey rental? the options are overwhelming and every advisor I ask gives conflicting advice - I suspect they only know what they get commission on.

I would like $5000 month income after banking the $250k.  I don’t want to risk the principal.  Am I better off just paying the capitol gains and banking the rest?

Finally, I had a property manager but found them creating false repairs and fired them.  The sale of the house is about 2/3’s of my wealth.

thoughts?.

[Dave Foster]

@Russell Sherman,  All of the options you list that you could 1031 into come with some risk.  

Mineral rights and Oil is a roller coaster ride.  

Vacation rentals???  Well they're not making any more beach front. But your experience with managers make this iffy. 

DSTs? not sexy or high returning but fairly stable.  Especially if you took the rest of your 1031 and put it into several different ones to mitigate risk.  

A 721 - I'll probably get flamed for this but I never think converting tax deferred to taxed is ever a good idea.  But if you're going to do that then do it quickly and take the bandaide off quickly.  Don't go into a 721 with limited options at a time when many reits start to under perform.  Take the cash and don't a 1031.  Pay your tax and invest in something that you know or.... don't invest at all.  Do you have a mortgage on your house?  Pay it off.  

If you are done with work then you need to first provide for your future and then after that is secure you can invest if you have any excess money.  

I know I know.  It's not the exciting answer.  But the kind of exciting that comes from a sinking investment that represents 66% or your net worth is not a goood feeling exciting.

If you have options to work again.  Then my advice would be completely different.