All Forum Posts by: Matthew Maggy

Thank you. This is massively helpful in deciding whether or not to 1031 Exchange if I do carry the note.

So, if I carry, and they pay interest only, then I am not actually realizing any of the cash gain, correct? Until they refinance the balloon, or just pay the cash?

Also, if I do carry, would the cash amount that I would get of $35k be taxed as all gain? Or would the basis of $26k be taken out of that and I only owe cap gains on 9k (plus depreciation)?

I've got a situation and I could really use some advice and input (it's time sensitive and I'm waiting to hear back from my accountant and 1031 Exchange agent).

I'm selling my out of state condo for $70k, I paid $26k in 2010. I want to employ a BRRR strategy locally in Richmond with the proceeds. And I will be doing a 1031 Exchange.

A wrinkle came up where I could carry the note for half down at 7%, which would give me $35k to play with and $203/month cash flow (which is what I want from a property anyway). 

A) I'm trying to figure out how this jives with a 1031 Exchange. Do I just Exchange the amount above the note? Which part gets taxed first against the basis? 

B) I have less money to play with for BRRR (which means not as nice of a property). Am I killing my velocity of money? It would be nice to have the cash flow to pay for property related expenses while fixing it up.

C) I could also sell the note if I wanted (but this would incur the capital gains, correct? Minus the 1031 Exchange protection?)

D) Any other aspects that I'm missing and should consider?

 I have 24 hours to make this decision. Ha.

Welcome to the site! BP has been great in helping me learn... the Plus membership is totally worth it for the calculators...

@Dave Foster Thanks for the advice.

One thing I was considering was putting the minimum down on a turnkey type property where I can match the $ amt cash flow, but as a higher rate of return than the condo, and put a larger down payment on a fixer upper, or pay cash for it with what remains. the condo would only sell for about $60k, so I would be sort of limited to the quality of properties that I could get. 

Are you guys licensed to do this in Virignia, or is it better to work with someone local? How does that work with selling in one state and buying in another?

Thanks Brad! I'm definitely leaning heavily toward selling. When I look at my monthly expenses, I'm bringing in $700/month rent, but $212 of that is eaten up by HOA, which, while providing exterior repairs, is a bit more than I would budget for exterior CapEx.

It had occurred to me that the expense of a 1031 might not be worth not paying the gains. My main concern is the limited time and inflexibility, because I'd like to use some to pay cash for a property out here, and then use some of that money to to repairs for the BRRR thing.

I planned on talking to my accountant about the 1031 exchange to mull over the options.

Long Term Capital gains is like 18% though? That's almost a 5th of the proceeds. That's $12k. 

Okay. Thank you for the advice. With the perspective of that percentage return, and not being able to pull the equity out, it makes sense to sell it and turn that into 2 or 3 properties locally. 

I have a condo in Reno, NV that I paid cash for in 2010 (before I knew about real estate strategies, etc.) which has more than doubled in value. I want to pull that equity out to put into play a BRRR strategy where I currently live in Richmond, VA.

After 6 weeks of underwriting, the bank turned down my first mortgage because the Condo Questionnaire showed that the complex had too high of percentage of rentals for Fannie/Freddie to back the loan, thus, the company won't loan money. 

So, undeterred, I'm looking at other options:

1) Sell it. Plain and simple. Do I really want a condo that has strict HOA, can't have equity pulled out via financing? But it cash flows $300/month after all expenses. What about capital gains? On the other hand, Reno is a hot market and I might be able to get more than the appraised value.

2) Sell it, but carry the note. I could possible sell it and carry the note, but I wouldn't get more than 20% of the cash as down payment. Could I maybe sell it requiring 50% down (the appraisal came in at $60k)  and carry the rest as a note? Do people actually purchase investment properties with those terms?

3) Hold it and keep the cash flow coming, and try to find people with money to invest in deals when I have no proven track record of making this strategy work? Hard money is soooo expensive.

4) Alternative options?

Advice is appreciated.

Haven't used these guys, but Keith Weinhold of Get Rich Education Podcast recommends them... of course I would do due diligence as I haven't worked with these guys or anybody else in Atlanta.:

http://www.gainvesting.com/

To answer your question about oil:

Houston market is has a lot of employment by oil companies. Oil is low, less oil jobs, less income = less buyers, less jobs=less renters. If there are less people buying and renting, housing prices and rents may fall. Less demand=over supply = prices falling.

Property values are going up and will continue. My Reno realtor and Adivsor let me know that rents will be rising a lot as well.