All Forum Posts by: Annie G.

Hi All, 

Does paying off a HELOC count as a 1031 exchange? As a theoretical, if I took out a HELOC on my primary residence, used that capital to purchase, rehab, & then sell an investment property, could I use the profit to pay back my HELOC tax-free?

On a similar vein, capital pulled from a cash out refinance is not taxed, correct? Theoretically I could use a HELOC to Buy-Rehab-Refi, and use the capital from the refinance to pay back the HELOC without facing any capital gains taxes, correct? My understanding is that technically there are no capital gains, as it's just wealth shifting within your portfolio.

Do I have this sorted out correctly in my mind?

Hi Brendon, yes, it depends. I will stipulate that I am not yet an investor (I was just introduced to BP & am researching the possibilities) but I do live about a mile East of Lincoln High School. Among my friends in Tacoma- mostly white-collar, non-Seattle commuting, late 20s to 30 somethings, with no kids- most have rented in the North End, downtown, or Fircrest, and then gravitated towards the South and East side to buy starter homes. 

The cost of renting a nice SFH on a well kept street didn't seem to vary much across Tacoma (note, this is for comparable SFHs and excludes the new apartments along the waterfront), so I chose to rent in the North End. However, the cost of buying the same type of property is where the spread was introduced, with homes in the nice end neighborhoods of Tacoma costing $100k more for comps than in South & East Tacoma. Again, this was my perspective as a new home buyer (I bought last year), not an investor.

The quality of the Lincoln District does indeed vary dramatically street by street, and I would encourage you to drive around during both day and night to observe. The street I bought on is part of a three block stretch of nice homes occupied mostly by home-owners (with kids), as well as one large section 8 apartment complex. The few SFH renters on my street are generally military families that commute to JBLM (who rented blindly before moving to the area). It is a quiet area and everyone seems to look out for each other. But just a few blocks away on G street, my home owning friends complain of loud domestic disputes at night and their cars getting shot at with BB guns. I have not met any students living in this area, and the young professionals tend to be the home owners, not renters. The main Safeway in the Lincoln District, on S 38th, is also rough, with a poor selection of "higher end" produce (i.e. organic) and no self check out lanes- if that gives you an indication of the level of trust they have for their clients.

Here is a link to the City of Tacoma's Lincoln Revitalization page, and here is an article with an update of the project.

Hope this helps.