All Forum Posts by: Daniel Thomas

Thanks @Mike Cumbie that doesnt sound bad at all.  

I plan on using a VA Home Loan to purchas a duplex in my local area that I will then move myself, wife and two kids into. I dont have a ton saved up (we are aggressively paying down debt and on a budget) so I wanted to use this method to acquire my first rental property. I know that we will have to live there for a year before refinancing out and moving opening up the unit we occupied to renters.

My question/dilemma: When I do find a duplex it will almost certainly be occupied (hurray super tight Omaha market) but I will need to occupy it per my loan. How does that get sorted? If the tenants are in a lease I have to honor it till it ends right? But if both units are in a lease than how do i occupy the property fulfilling the requirement of the VA? I would LOVE some guidance on this as it is extremely likely to happen give Omaha's tight market/rental situation. Thanks!

Originally posted by @Dave Foster:

@Daniel Thomas, It's all part of your strategy and quite honestly a lot of folks don't think strategically through all sides of the issues.  And there is no form to fill out.  You either qualify and your accountant takes it out of your taxable income or you don't.  So while it's critically strategically it also just sort of happens accidentally without a lot of planning or forethought.

Yes it's a very common builder strategy - 

1. build two and move into one.  Sell the other and pay ordinary income taxes to provide income and seed for the next build.

2. Once complete in two years sell the first one tax free.  Move into one of the new builds and sell the other one and pay ordinary income taxes to provide income and seed for the next build.

3. etc etc

@Jay Hinrichs, I had friends who did this and asked the wife how she handled it.  Her reply was that when it was time to remodel they just moved instead!

I'm working on my 6th.  But Jay is so much older than I :)

Point is if you even do it once or twice and shelter 300K in taxes that's easily $50K of taxes.  And invested at 10% that is $5K/year in your pocket just because of sec 121.  When the tool is there and so easy to use....why not???

 Well said Dave. I think when I read about it the idea seemed so easy that surely I was missing something. Thx for the info. Regardless of how I choose my first move I’d be a fool to not use section 121. 

Originally posted by @Jay Hinrichs:

@Mindy Jensen  is the 121  queen I myself have done it 6 times since I bought my first home in 77.. and will do it one more time before I call it quits.. now I was fortunate that all of them were in the SF bay area and 2 were in Portland.. so I have literally made millions tax free..

the specialness of this is unlike when you own rentals there is no recapture and huge penalty when you sell.. you sell get your gain tax free no recapture its by far the best treatment in the US real estate tax code in my mind other than or equal to 1031 if your goal is to roll up and give to heirs at stepped up basis.

but yes many builders have done this over the years.

and yes you can value add you can do what ever it just has to be your primary and live there 2 of 5 years.. they darn near changed it to 4 years in the new tax code but it got bounced last minute and remained the same..

so in my humble opinion yes its common and maybe a lot of folks don't know it.. but it is truly special and sure has treated me well personally.

now if you live in an area were there is limited to no appreciation its not really a factor..

if you bought a home for 120k and sold it 15 years later for 160k  well not going to make a huge difference

but for those in areas like

Thanks sir, I live in Omaha so appreciation isnt that great but I've recently come across this idea as a way to maximize profit if I decide to build, live, and sell a SFH. Will try to do it in West Omaha where the property values are steadily increasing as the area is becoming very desirable. Thanks for the input.

I'm trying to understand what the big deal is?  As I understand it, you save capital gains on $250k for single, $500k for married when you sell the house you lived in so long as you lived in 2 of the previous 5 years.  Ok, tax savings, yay.....and?  My question is:  doesnt that mean that everyone who sells a house they live in is doing this?  I've read about this idea like it was some sweet deal (tax savings is great yes) but I am missing what is so special (how others make it seem) or does every home owner who ends up selling use this and it isnt special but actually typical?  Are there more stipulations?  Can I build a house, live in it for two years and sell it using section 121 to save taxes?  Does the house have to be already built?  Can I buy a house that needs some rehab, upgrade it while living there and save on the taxes of the higher value?  

I apologize for posting this if it has been covered but I find the search function on this site incredibly lacking.  I searched on 'section 121' and got 10 pages of section 8 posts.  I read the article that mentions 121 some but it didnt really address my above questions.  Thanks for reading and replying.

Hello, I am looking to buy a DUPLEX/TRIPLEX in or around Omaha for my family (wife, two small children) to live in and likely rent out the other side. I am looking for a property that is in a family friendly area that can be turnkey or minor to moderate rehab (must be livable). If you have any ideas or suggestions or properties worth considering please do not hesitate to email me at the address in my profile. Thanks. 

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Hello all. I need a home appraiser for find the value of the home I’m currently living in. It was never sold after being built as we entered into a form of rent to own and has never been appraised. It is in a difficult neighborhood to comp in as it is quite different from the others. So please list/pm/email you’re preferred appraisers! Thanks so much.

Looking forward to it as always. 

So glad I don’t live downtown in Omaha anymore. The swarm of nerds with their BH lanyards bogging down every bar and restraunt for a 2 mile radius suuuuucked. I’m kidding...mostly.