How to Sell Turnkey Property Fast

[Andrew Yu]

I just finished remodeling a property. However, I put quite a bit money in it and I wanna avoid the short term cap gain. So I decide to rent it for about 1 year then sell the turnkey. For those of you with experience of selling turnkey, is it better to have section 8 tenant in or regular tenant in it? Section 8 can rent slightly higher rent and it's guaranteed money every month. But some landlords don't like it. 

[Dave Foster]

@Andrew Yu, Your plan is fine if the numbers work for you.  The devils going to be in the details of your particular property and no one has been given enough information to guide you on that.

1. You are planning on holding that property for a year.  That will qualify it for capital gains treatment. So even without a 1031 you will convert that ordinary income tax into a capital gain.

2. If you choose you will be able to do a 1031 at that time as well and completely defer the tax.  By taking the renovated property and renting it out you are in fact demonstrating your intent to hold for investment as referred to above.  So a 1031 at the end of that would be perfectly appropriate.

The question is going to be "what will be the real savings.

1. Right now the house is in pristine sale order.  So your gross profit will be the highest.  If you hold you will incur costs to ready for sale later.  Depending on your renter this could be next to nothing or enough to offset any tax rate savings.

2. The other side of that coin is that your rental will generate income and provide other tax favored treatment.  So in addition to lowering the net tax rate you could also actually make additional net income.

3. The other big joker is opportunity cost of the money now.  How much equity you're leaving in the house in order to rent it.  What you would be doing with that equity.  The cost of the financing etc etc.

Lots of unknowns