Newbie in Fresno, CA area

[Josiah Collins]

Hello everyone! My name is Josiah and I moved to the Fresno area about a year ago from San Jose, CA. I got married and she lived in Fresno (pretty crazy story on how we met), so here I am! I currently work in sales at a Ferguson showroom in Fresno which deals with appliances, lighting and plumbing. I've always been interested in investing in general but a year ago I was pretty much forced into a landlord situation. My wife was in the processing of buying a new home in Fresno and I owned a home in San Jose. It didn't make sense to sell the San Jose house so we decided to rent it out. The landlord experience hasn't been terrible, but it's very difficult to manage it from Fresno and there is not enough cash flow for a property manager. We are considering selling the property in May when the tenants lease expires and doing a 1031 exchange for one or more properties in the Fresno area. I would love any advice that people have with regards to 1031 exchanges and the finer details. I'm particularly confused about how they look at the selling price of my current rental compared to properties we may purchase. Another area I'm super passionate/nerdy about is budgeting and personal finance. I'm a huge finance if YNAB and think it has been critical in changing my finances over the last five years! I look forward to getting plugged in here and have been lurking about he last few weeks reading everything I can about real estate investing, particularly strategies around buy and hold. Thank you! Josiah Collins

[Dave Foster]

@Josiah Collins, You're certainly on the right track thinking about a 1031 so you can defer tax on the gain of the SJ house.  But before you commit to that route take a look at the dates of ownership and residence in that house before you moved to Fresno.

Sec 121 of the code allows you to sell a house you have lived in for 2 out of the previous 5 years and take the first $250K of gain tax free.  Tax free would be ever so much better than tax deferred and you avoid the 1031 fees and timelines etc.

Since you just got married and moved out a year ago you're still very much in the 5 year look back to put together 2 years where you lived in it.  Even if you didn't make the full 2 year period there are some narrow parameters for proration of the time.  My guess is that getting married and moving to a new town/job would fit that bill.

Explore that with your accountant before you do the 1031.  The 1031 will always work if 121 doesn't.