All Forum Posts by: JP Krueger

Quote from @Lien Vuong:

I'm going through something very similar in Eastie and have decided to go through Zoning as it allows me to inject value without doing anything to it. That's a win for me, I dont think that $200k would be enough to turn that building into a condo grade property and you'll like need to dormer because of the pitch of that attic. 

Happy to give you an ear and talk through if you'd like, best of luck!

This is what I was looking for when I posted here, thank you. The tenant in one unit has offered to buy it at $650/sqft with only a bathroom fluff and buff.  So, I will re-side, new roof, new front stairs, new windows, a couple dormers(to your point), build out a basement bonus room, and gut and rebuild the other unit all for under 300K? 

Thanks for the feedback.  I am happy to hear that you think Boston will keep going up! I have 400k in Heloc debt and the interest rates have come up a bit so the interest alone is killing me monthly.  Don't worry though, the debt was used to create a bit of wealth.  I would hold forever if I could but I can only make less than I spend for so long.  I have a chunk coming in next year so I will use that to renovate unit 1 and the exterior.  Luckily the tenant in unit 2 is very interested in a win/win where he buys it as is for a price that works for both of us and will be a first time property owner.  This eliminates some of the construction/time variables that were making this decision so difficult.  

Hey Ethan, good point about the unforeseen costs because I hadn't really thought about that.  I need the cash to pay off other Heloc debts that have become expensive with higher interest rates so that is why I am selling. Otherwise I would hold forever because my brain was built for landlording. I offered the rear unrenovated unit to my tenant and he is going to buy it at the avg price per sqft for the area so that removes a few variables for me.  Condo conversion it is!

Ah.. the best kind of conversion.  I offered the rear unrenovated unit to my tenant at the avg price per sqft foot for the neighborhood and he wants to buy it.. So that settles my internal debate.  If I need a lawyer for the conversion I will let you know.  

Thanks!  Do you have their builder's contact?  It seems like price per sqft in the Eagle Hill area of Eastie is all over the place.  From $530 to $716.  It's hard to dive in with that level of uncertainty.

Hi, I own a 2 family in East Boston.  It pretty much needs to be gutted on the inside(except one unit was recently partially redone) and needs everything on the exterior as well.  I need the cash so I am looking into either skipping the headache and selling as a 2 family or making it really pretty and selling as 2 condos. There is additional framing and electric in the basement that could be turned into a bonus room, bed room or if I was really trying to open up a can of worms, a 3rd unit.  The problem is I cant even come up with ballpark numbers because there are so many variables, but I will give it a shot.

Sell as is: $700k

Condo conversion: 2 units for total of 1.1M to 1.3M

Expenses: 200k-300k for attorney fees and all repairs

Opportunity cost(carrying mortgage and delaying debt paydown/investing): 150k

Condo conversion profit: $650K To $950k

What am I missing? What would you do?

Hey Justin, what did you end up doing and how did it end up?  I am going through the same thought process in East Boston

Thanks a lot for this!

Originally posted by @Jonathan Bunting:

Originally posted by @JP Krueger:

You want the investment values to balance out. So let's say you sell for $1.2million, and the investment portion is 1/3. So the personal residence portion is $400K if the three dwellings are of equal value, and the investment portion is $800K. If you purchase for $1.6million, and, again, the two dwellings are of equal value, you are able to defer the $800K investment sale into the $800K investment purchase. The non-taxable adjusted basis for the investment percentage must be surpassed in the value of the acquisition property before gain even begins to be deferred. So you are not going based on the gain amount, but your are basing this on sales prices (less certain qualifying non-recurring, one-time costs to close that may be able to reduce the amount of gain realized by the IRS). If your acquisition investment amount is less than the investment amount of the relinquished property, it is still possible to defer SOME gain so long as the acquisition value is greater than the adjusted basis of the investment portion of the property being sold -- however there would be capital gains realized on the difference.

Thanks Kyle, does the down payment on the new place have to be of equal amount of the investment portion of the sale. Like profit 700k on the investment piece of the sale and put 700k down on next place. Or is it more related to purchase price of new place?

Originally posted by @Kyle Kadish:

@JP Krueger it can be done for the portion used as investment.

If all three units are equal size, 1/3 of price would be personal and 2/3 investment. You are using 1031 for the investment and 121 for the personal use.

3 unit to 2 unit. 1 unit will be occupied by owner in future purchase. So I would imagine the current owner occupied unit would be tax deferred up to 500k and the other 2 units could be deferred to the rental unit in the 2 family. Does that make sense? Basically the investment portion of the property’s profit would carry over/defer to the purchased rental unit.