All Forum Posts by: Mark Hughes

@Lallu Tappu interested in this area as well. Did you go thru with the deal? Any learnings/challenges w texoma? Mark

@Garrett Gruss hi Garrett. I was wondering the same thing. Did you ever Perdue this further or make any contacts? I'm looking for a good PM in the are to manage a STR I'm interested in purchasing there. TIA - Mark

@Deborah Burian. Interested to learn more about the Texoma market. Do you have any PMs or turn key contacts for a long distance investor like me looking to get plugged in to OK markets? -Mark

@Jonathan W.

Pretty much anytime a listing says “this one will go quickly!” Lol (and then seeing that listing stay on the market…. :)

Partial 1031 question here for the tax gurus. Long post. Not asking tax/legal advice, just want to understand theoretical concept between the 3 options i outlay below. Looking to do a partial 1031 and want to understand the different of cash boot versus mortgage boot and how those work together or in combination if so.

My situation. I purchased an investment property in 2020 for 311k with a $230k mortgage using a 1031 from a another property and in essence deferred $85k of taxes into this property. Therefore my basis in the property was approx $230k after closing costs but I have also put $20k into capital improvements (insulation, appliances, remodeled flooring, appliances, etc) over the last 2 years so that brings it up to $250k total basis right now.

I now considering selling this property again. The wife wants to pay down debt on some other properties and I want to 1031 to keep investing so it occurred to us to meet in the middle and do a partial 1031 to avoid some taxes, buy another like property for say 1/2 of the amount and take cash and pay taxes on the 1/2 boot and want to understand that.

If I sell for $550k that would yield approx $500k after selling fees (trying to keep at simple/round numbers for simplicity). If there’s $220k mort left on the house then I’d have approx $280k in cash to work with that would go to the 1031 intermediary. Assuming I would fall into the 15% long term capital gains rate for this tax year that I’d sell in how would these options play out.

Option 1: if I buy one property at $293k total price w a loan of $221k I would only use $72k of the cash towards down payment and have another $208k that would be paid in “boot” to me. Is that full $208k have the LTCG tax on it for approx $31k + depreciation recapture? (But I’ve replaced the loan so would be good on debt amount)

Option 2: if I buy one property for cash at $281k I’ve used all the cash amount but still think I would have boot mortgage as I didn’t use the any debt amount of the $220k I had previously. So would I pay 15% LTCG tax on the boot mortgage amount for approx $33k + depreciation recapture?

Option 3: here’s the fun question: if I buy one property for roughly same amount let’s say $281k but use half cash and half loan I’d only use $140k of the $280k cash and also only get $141k mortgage compared to the $220k before.

So is my tax combined between both cash boot and mortgage boot? (Cash boot $280k - $140k = $140k x 15% = $21k) AND (Mortgage boot = $220k-$141k = $79k x 15% = $12k)

For a total of approx $33k + depreciation recapture?

If that’s so it basically doesn’t matter which option I’d do I would owe approx $32k in tax?

If I didn’t use 1031 at all and just cashed out I think it would be around $40k in taxes ($500k-$250k basis) so why would replacing approx 1/2 the value still result in 3/4’s of the tax? What am I missing?!?!

TIA - Mark

Anyone have any updates on the ways and means political stuff? Last I heard in September there might be changes that negatively affect people investing in 506 reg D type of syndications via their self directed IRAs. What are you guys hearing? What’s the back up plan in case we only have a short period of moving money into different accounts???

@Robert Carmody can you reupload that chart? It’s too blurry for me to read but I would love to see this and know where you cited this from. Thanks!

@Ryan Zamora I love it that you’re considering multiple exit strategies. Always good to think about options as things change down the road and it’s great to have choices on what you want to do.

@Stephen Bradford. Do they not have the right to buy those houses? If they want to pay more than someone else that's their choice. If you were selling your house and you got a higher offer (possibly even all cash) from a company than a first timer home buyer on an FHA with tons of stipulations and red tape, what would you do?

Or better yet. Let’s think about it this way. Institutional investors (corps) are buying houses. Aren’t many of these publicly owned companies, which are actually owned by shareholders (ie more people), so that’s profit that gets paid out in dividends and potentially increase in value overtime in the form of returns as they go up in price? But wait a second. Don’t you have the right to buy stock in those publicly traded companies just like everyone else? But what if other people buy the stocks for more money than you’re willing to pay, don’t they have that right?

Do you have a 401k or IRA? Do you own any large mutual funds or target date retirement accounts? (If you own a VTI, VTSAX, S&P500 funds, then you actually are a part owner in BLK or other institutional investors). You might have even received a proxy vote in the last couple years and might not have even looked into it or read the annual report. perhaps you might have had the opportunity to have your voice heard directly by that corporation…and in a round about facetious sort a way you are actually complaining about company that (possibly) you and millions of other Americans like me are part owners of and relying on the industriousness of capitalist corporations to be resourceful and successful so that we can rely on them collectively to earn us a fair return on the stock market so we can rest easy when we check our retirement accounts that they made a return. If you don't own any stocks, then that's fine if you choose not to.

It’s all a circle and it’s called a free market. It’s not a perfect system but if you spend too much time and energy complaining about it, you miss out on the opportunity that others are pursuing. Pick a strategy and go for it, there’s enough to go around for those that seize the day.

@Blaine Martinez IMO Farmington tended to rise and fall a bit with the oil industry over the last few decades. Now however, following national trends they also have a tighter supply and some demand is spilling over from Durango area w covid/remote work capabilities.

I agree with other responses regarding ABQ trending up for rent appreciation in near/medium term.