Is now a time to do a 1031 Exchange?

[Candice De]

I have a duplex just outside of Denver.  It is a quaint 1BR/ 1BA on each side.  We have the original tenants on one side and good (but newer) tenants on the other side.  It would be a perfect house hack for someone (not my family of four unfortunately).  We are making small cash flow and decent appreciation.  I am wondering when is a good time to let it go. The leases go through next summer.  

Then, is it crazy to think we can get under contract on another "good deal" in this craziness? I also thought I heard something about Biden doing away with 1031 Exchanges.  Any insights?

[James Carlson]

@Candice De

First off, congrats on getting yourself in a good situation. The Denver real estate market has made a lot of us look like geniuses the last few years. A couple notes from your question.

The 1031 going away?
Yes, during his campaign Biden proposed eliminating the 1031 exchange, but that's unlikely to go away as Republicans are likely to retain at least one of the Georgia senate seats, thus retaining power of the Senate. Even if the Democrats win the Senate with the Georgia runoffs, I don't know if I see them going through with this particular proposal. (I'm philosophically in favor of taking it away, but I think the powers that be like it too much and there will be heavy lobbying.)

To sell or not?
You could run Return on Equity and other calculations, but if you want to keep it simple, just see how much equity you have. (That's appreciation in value + mortgage paydown.) Is it a lot? Enough that if you sold -- even after commissions and title fees -- you'd have enough equity to buy two more more places? Then I say sell. If you don't have a ton of equity, then I'd hold. What's a lot and what's not? I'd think about what else you could buy with that cash.

Going through this ourselves
We have a Capitol Hill condo in Denver with a good chunk in equity right now ourselves. That's just dead money, not working for at all for us. The way we're thinking about it is this:

• The condo is worth about $300,000 right now. 
• We have about $135,000 in equity.
• If we sell, we should come out with about $120-$125,000 in net proceeds.
• That's 20% for an investment on one $600,000 house or two $300,000 homes. 
• That's $600,000 in assets is double what we currently own, so we're selling our condo and leveraging up

(Totally unrelated side note on the proceeds of the above sell. Erin, my wife, and I are going to split the money and then have a competition to see who can buy the best investment or investments. In state, out of state, partnered up or solo, condos, houses, house hack, rent-by-the-room, Airbnb in Littleton or Arvada where it's now legal .... whatever! Any model is allowed. May the best investor win! Should be a fun experiment ... or the end of our marriage. We'll see!)

Whatever you decide, I wish you the best!