New in Chicago - non-pro landlord and agent

New in Chicago - non-pro landlord and agent

Chicago, IL · Member since 2016 · 2 posts · 2 votes

Hi all. New here. I am interested in figuring out what to do with the property I have and how to best allocate some funds as investments. I am an agent and a live-on-site landlord in a three-flat in the ever ridiculously appreciating West Town. I work downtown and would like to have someone help me analyze my current property and help figure out what should be done (maintenance/updates); what can be done (1860s foundation); and what makes sense to do (to keep up the rents vs the prospect it will be torn down if I sell). I would also like ideas on how to invest in other properties while having capital and a day job, and not being handy. I am a licensed agent but I work for a bank and their policy will allow me only to conduct deals for myself or family, so currently my license is with NIREIN. While I have other investments, that same policy limits what I can do with securities, so real estate, as long as not REO'd by my bank, is fair game. I want to keep living in West Town and prefer direct ownership vs condo situations but my budget means it is highly unlikely I would find another freehold in the area. Have considered 1031 exchange but that would work only if I found a local 3-unit that is larger than mine. I know the taxes will kill me if I don't do that. Cheers all!

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  • Professional · Houston, TX · Member since 2016 · 24 posts · 4 votes
    10y

    You don't need to find a local 3-unit that is larger than mine to do a 1031. Any kind of investment property will work. And if you want to take out some cash you would only pay cap gain tax on the boot or what cash you take out.

  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    10y

    @Kirstin Rogers, you may be in better shape than you think at this point.  From what I read you actually own to different properties that are under one roof - 1/3rd is your primary residence and 2/3rds is investment real estate.  If you have lived in that property for 2 out of 5 years prior to sale then you can take the first 250K of (500K if married) gain apportioned to the part you live in tax free.  that would leave you only needing to 1031 the portion you have been renting (2/3rds or whatever the allocation is).  That changes your reinvestment requirements dramatically.

    In order to defer all tax you must purchase at least as much as you sell (in your case it would only be the portion that you have treated as investment) and you must use all of your proceeds in that purchase (again only the portion associated with the rentals).  This does not have to be one property but you can purchase more than one.  You can also purchase less than what you sell but you will pay tax on the difference.

    So here's at least a couple options for you to consider:

    1. Sell and take your primary residence portion tax free and 

    A. pay the tax on the rental portion 

    B. do a 1031 on the rental portion but buy less since the sales price of the rental portion is less.

    C. do a 1031 on the rental portion and buy two properties instead of one to equal the sales price.

    D. do a 1031 but buy less than what you sell and pay a little tax.

    Break out the Excel sheet :)

    The 1031 Investor5137 Reviews
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