All Forum Posts by: Drew Slew

thanks good idea!

Interesting in hearing feedback and pricing comparables to an off market potential deal where I have met the owner who is willing to sell his 3 units building (SFH with 2/2 and behind it an ADU with 2 other 1bed units and 2 car garage). Location seems quite good close to Espianade park.

Current rents and building quality needs work, total rent income is around 5k/month, parcel is quite big 14k sqft. Indicative price around $1.1M, which would be a loss, with tax around 2% potentially 20k/year. Value adds that could bring up cashflow/value:

- renovating units to bring rent up to 6-7k/month 

- ability to rent out parking space on the property as lot is large - trailers, parking, RVs etc - about 1-2k/month cashflow. 

- property had TDR trasnferable development rights and can be built 5 stories on it. I wouldnt develop anything but sitting on it could be worth waiting to one day add new units/condos or a larger multifamily partnering with a developer. 

- half of parcel can also be sold off as only one half has the SFH and ADU on it

Owner is quite firm on the price. Even though it doesnt cashflow well asap, the potential would be its proximity to Las Olas, downtown and the size of the lot, different development options. 

Looking to hear any ideas, how one would tackle this opportunity or what would you do other than raising rents slowly and sitting on it to refi or wait on appreciation. Thanks for any input

Thanks for all the help and info on this thread, my 2family sold May 29, at asking price 659k. I did move out price as I initially thought psychological 649k would be better, because I realized that with 1 unit vacant (1 tenant paying low $1850/m in first floor unit) i either get homeowners buying or investors who will lowball. 

Biggest issue is the tax, its much higher than anticipated 50k as w depreciation recapture is 81k after i paid 5800 transfer tax at closing.. so thats a BIG problem and i want to make sure i pay minimum on that - use 10-20k upgrades i put in prior to selling, max out LLC this year to write all expenses off from it etc.

- Any advice on how to offset that 80k tax? Also my CPA says it needs to be paid by 6/15 which im definitely not doing, way too early. Only paying tax next year April 2025

Learnings that might be valuable to the BP community:

- summary highlight reel of returns https://www.facebook.com/reel/463607949581515 (bought for 395k, 3.75% 30yr fix, took 60k heloc out, cash flowed ok, water bill usually $3-600/m so bad etc) Put on new roof 19k, upgraded w new paint, vanity, boilers 10k prior to selling in April.

- buyer was NACA 0% down, and they will occupy 1st floor unit, got lucky as they fit well into neighborhood and love the house. NACA is VERY slow, they did 2x appraisal and 2x inspection, asked to upgrade a bunch of stuff like random hand rails on 2nd floor stairs etc

- marketing helped with digital floorplans, 3d tour > only held 1 open house and didnt receive that many offers.. surprising. Most investor offers were lowball 500-550k and not professional, some never came to see the place so outright wouldnt consider them. 

Overall this area is definitely going to keep going up, but it was time to move on from this investment and find others in CT/FL as more assets as there now. This area Ocean ave/Wilkinson ave around the elementary school in Jersey City will keep going up due to new highrises and condos around it and 20mins proximity to NYC, could well be 850k in the next 3-5yrs. 

In terms of taxes, this is what I got from my CPA< but i dont think its still right, seems VERY high. Not seeing the 1% exit tax for NJ and all the closing costs too. so it would be around 100k total to just sell a place with 340k-ish profit. cant be

Selling price: 649,000

Purchased: 395,000, loan outstanding: 285,000

TAX:

Federal; $64,000

NJ: $20,000

Federal tax breakdown:

Cost basis: $395,000

Proceeds: $649,000

Depreciation Recapture: $56,000

Net taxable gain: $310,000

Federal Tax Breakdown:

Depreciation Recapture taxed at 25%: $14,000

Gain from sale taxed at 15%: $38,100

Net investment income tax of 3.8%: $11,500

great neighborhood obv 3yrs went by since the OP, but now the avg price is 585k in the neighb, i got a 2fam around Ocean ave and Bidwell around high 300s in 2018, planning to sell next month for mid 600s. 

As i see driving down from north, you have insane highrise growth at Journal sq, all the downtown JC area is filled up w luxury condos and the bergen lafayette area around 74 also filling up w lux condos. Theres a few bigger developments now done as you drive down on Ocean ave, so money has come down. Idk if OP bought anything 3yrs ago (when mortgagees were in low 3s) but since then a lot has changed. I guess the area is still "up and coming" but you get 2fams now in the 1M pricerange so idk who would call that up and coming at this point pricewise.

@Shawn Mcenteer sounds good thanks a lot Shawn, lets PM here

@Bill B. @Dave Foster forgot to add one detail, thanks for the continued help:

- i have a HELOC on this property, owe about 45k on that. So would that have any effect on taxes to be paid or its just 2nd mortgage to be paid upon closing, making capital gains less (285k mortgage+45k HELOC=330k loan-600k sales price=270k total capital gains)

- I am reading that even as a FL resident selling a NJ property i have to pay 8.97% NJ state capital gains tax plus a 1% realty transfer tax.. 

- so to summarize: 15% federal capital gains tax, 8.97% NJ state tax, 1% realty transfer tax, depreciation recapture and whatever other costs for closing.

https://www.nj.gov/treasury/taxation/documents/pdf/guides/Bu...

ok great thanks, so the 50k ballpark total tax seems right then, 40-50k

 Dave, thanks a lot for the comment, will PM you about the 1031 exchange so we can go over details, main concern is time and what it would costs. 

As I mentioned, my main goal now is to actually figure out what taxes would be on a potential 600k sale to see if 1031 is worth it. 3% realtor commission is 18k so thats pretty good if it can be added to 1031.

 Thanks a lot Bill, very helpful. So your estimate is (purchase price 400k in 2018, selling at 600k 2024) to be around 180k capital gains total and taxes on the 180k (lets say 15% rate so thats 27k), 40k federal capex, 13k depreciation recapture? so around 40+13+27=80k total taxes? seems crazy hight for only 180k profit. I was AT MOST looking at 50k total. 

Then a 1031 exchange is def needed. Im trying to guesstimate properly what my actual taxes on the sale would be to see if a 1031 is worth it or just use the cash from sale and invest later/stocks etc.

Thanks