All Forum Posts by: Kevin Cole

Appreciate it!

@Corby Goade Because nothing is official. I wouldn't want to scare a buyer away because of some capital improvements that haven't even been voted on yet. A new owner would get to be a part of that vote. I don't want to make concessions/value reductions based on hypothetical work that they could then vote against. 

I am likely moving towards selling a unit of mine. The unit is part of a condo association for which we pay fees. I am on the board of the condo association, so I have been privy to discussions of upcoming work the association would like to do. In preparation of this work, we have voted on a special assessment for 2025 and 2026 to raise our reserves. Those special assessments will not be enough, and the reality is the association will likely be taking debt to approach these projects (eg. paving the parking lot, residing a building) and that financial burden would be on the owners and the association. 

My question is this: Do I need to disclose the associations intent to approach these larger projects in the next 2-5 years? I would certainly disclose the currently approved special assessments, but since any further financial obligations and project plans have not been voted on by the membership, approved in a budget, or secured in a loan; must I disclose the knowledge that the board is trending in that direction?

@Andrew Bosco

I would like real estate to be a part of my wealth building strategy. I know leaving a w-2 isn't an overnight change, but I love the idea of financial independence and would love to not be reliant on it. I have one child under 2 yrs, and another on the way, so thinking about their long term safety and education is on mind. I know that my current cash flow is a result of the unit being my primary residence first, and that not all units will cash flow like this, but can't help the feeling that I should be expanding my rental portfolio over the years. I currently self manage so I don't have systems/team. I don't have a project lined up currently, as I think the project targets vary greatly on the result of this decision since there is so much equity in the condo. I also know I can look at ways of borrowing against that equity (HELOC for example) but I also just feel like if I take debt on that property the cashflow goes down, and then if the association also takes the loan it goes down more, and at that point I don't know why it would be a better option than selling before August.

I'm just new to this world and wonder what someone with some experience would do. Is it crazy to think I can better my cashflow situation if I reallocate the equity to a new deal? Does scale achieve that?

First things first--this is my FIRST bigger pockets forum post ever! Apologies if it is long, but I have been going back and forth on this issue for a while and would like some input. 

Scenario: 
- I have a 2bd/2bath townhouse style condo in southern NH that used to be my primary residence. In July 2022 my wife and I bought a larger home to be our primary, and we have since rented out the condo. 
- Despite 3 tenants in under 3 years, it has done very well for us and has only been "vacant" for 15 days in that period, and has great cash flow, ~$1000/mo due to ~50% equity in the property, and a low covid-era interest rate. 
- I have been saving ALL of my cashflow into its own account to accumulate to buy the next rental (totaling ~$24,000). I believe something like a 2-4 unit small multifamily is likely my next strategy and I am exploring how to make that work.
- Due to my position on the board for the condo association, I am aware of long-term large projects that the association intends to embark on. We have a parking lot in need of paving, and the building will likely need to be re-sided. The association has investigated loan products for such work, but has not committed to anything. Some special assessments are already board-approved for 2025 and 2026 to help raise capital for such items, however I know when the time comes there will be a loan which likely demands a higher monthly payment for owners -- reducing my cashflow. 
- Based on sale of other units in the complex, I believe my current equity to be roughly $160,000, a little more than 50% equity. 
- The condo is currently leased through April 30, 2025. 
- August 2025 will be 3 years since I moved out. This is an important date for the 2-in-5 criteria for capital gains exemption. When I look at the equity and the 15% Capital gains tax bracket I would likely be in, I would avoid ~$24,000 in taxes if sold before Aug. 2025.
- I am aware of my 1031 options should I want to sell and defer taxes beyond that 3-year date (and would need to continue to do so until death if I wanted to avoid those taxes instead of just defer them). 
- I believe the current rental situation I have is better than the property warrants. I know the issues with the building, the quality of the condo, and the state of the association. These items have me slightly concerned and weighs on my decision, making me want to "take the money and run".

Question: Would you sell, abandoning a 3.125% interest rate, $1000/mo cashflow (which I believe would be roughly halved if a loan were taken for the capital improvements to the larger property), to lock in the equity gains tax-free made since 2020?
- Does this answer change/depend based on my current tenant's wishes? If they notify me they would like to leave does that encourage a sale?
- Regardless of sale now or a 1031 sale in future years, I would like to take the equity into new real estate opportunities.