All Forum Posts by: Kin Leung

While it's true that I can 1031 exchange and avoid the tax, I'm not sure if it is actually the right time to buy now as everything is still so expensive including multi family properties. That's why my thinking is sell now and be patient until the time is right. Thoughts? 

Hi all,

Here's our situation. Our tenant is moving out at the end of June and we have to decide whether we should continue renting out the house or sell it. It's in the Bay Area and if we sell, it'll put a good sum in our pocket. And since we've lived in that house for 2 of the last 5 years, the capital gain will be tax free as well. But we'll have to do it by the end of the year to qualify for the exemption. If we sell, our plan is to take our time to look into getting a multi family property maybe just outside the Bay Area (it's too expensive here) so we can continue to let the money grow. We may hold onto the money until the market slows down in the next couple years to get a suitable property as well. 

The other idea is to keep renting it to have a small but steady stream of passive income. 

My feeling is that the market will continue to stay this way for maybe another couple years and if we wait that long, we won't qualify for the $500k exemption since we will have passed the 2 yrs out of 5 timeline. That's way there's more incentive to sell now and take our time to look for the right multi family. 

How does my logic sound?

Thanks for your feedback. I'll look into speaking with a lender. In the meantime, I've heard that with commercial lending, lenders tend to care less about one's personal debt to income, at least compared to residential real estate. Any truth in that?? 

Our tenants will be moving out in a few months which prompted us to think about what we wanted to do with our rental property. It's only been rented out for 2 years and it's gained quite a bit of equity (approximately $400k).

We have 2 options in mind. One is to find new tenants and keep renting it out. The other is to 1031 exchanging it into a commercial apartment complex in a less hot market. The idea of 1031 exchange is appealing because it'll likely help us scale up our portfolio. My main concern is how we're going to qualify for a commercial loan since we have a relatively high debt to income ratio since we have mortgages on a couple other properties already. I understand that it usually requires a 30-35-% down which we can do after we sell the current property.

Thanks for your feedback. 

It's in North Carolina. Quite far from CA. Good idea to reach out to the tenant? Thanks.

Here's an update. The PM will charge a $250 lease renewal fee, meaning if I move forward with the 6 month lease, I'll have to pay another $250 6 months after. I'm thinking about contacting the tenant myself to see what they have in mind as far as how long they want to stay. It's an out of state rental and I've never contacted the tenant. I know PM's generally don't want owners to get involved but I think it'll help me add the personal touch and get a better sense from the tenant. What are your thoughts? Thanks.

Hi Stephen, Thanks for the quick tip. Is the $25 more symbolic than actual to you?

Hi, We have an out of state rental that a property manager manages for us. I just heard from the company that the tenant asked if we'd be open to changing the term of the lease renewal from 1 year to 6 months. The leases will be up in July. They've lived there for less than a year and so far have been trouble free. Anything for me chew on? Thanks.

Thanks for chiming in, Chris. In a sense you're right but another potential benefit I'm seeing is the passive income loss if the $500K mortgage interest can create a loss in my rentals which I'm quite sure will. 

Hi BP, We currently have 3 properties in the Bay Area, 1 of which is our primary residence. The other 2 are rental properties with enough positive cash flow that we have to pay taxes on the rental income after all the deductions and depreciation. Our primary residence has a loan balance of about $500k and the rental properties have appreciated enough that I'm quite sure have more than $500k equity despite still carrying mortgages on them. My question is if I take $500k out of the 2 rental properties and put the money towards my primary residence, it would probably generate a passive income loss and as a result offset the rental income tax I have to pay. Does that logic make sense? Are there implications I need to be aware of? More specially, if I put the $500k towards the primary residence, would it nullify the investment nature of the use of the money?? Thanks for everyone's input.