All Forum Posts by: Nick Sansivero

Hey, question for anyone familiar with 1031 exchanges. I have a rental property I've held since 2019 that I'm considering selling. Would I be able to do a 1031 if I'm buying a primary property with an ADU that I would use as a short term rental? I read somewhere I could 1031 the portion of the property that I'm renting (ADU), and pay capital gains tax as normal on the portion I'm living in? Is something like this possible? Let me know if you need more info. Thanks!

@Bill B. Thanks for that info Bill. My plan was to put about 20% down. I still need to speak with a lender to understand my loan options. I wasn't aware that having an LLC would make it as challenging as you mentioned.

As far as why I was considering an LLC - it seems like there's two camps, those who think it's a necessity for legal protection, especially as you grow in unit count, and those who think it's mainly a waste of time and money. I've been mostly torn on this issue, which is why I haven't transferred it out of my name yet. So I appreciate your perspective here as I make a decision..

And the reason I wanted to transfer it to an LLC now instead of after the 1031 is complete is mainly precautionary, because I have approval from my lender now to complete the transfer, whereas I'm not sure if my future lender for the replacement property will allow it and decide to trigger the due on sale. But perhaps that's not something I should worry about?

@Russell Brazil I did live in it, but not for 2 years unfortunately  

Hi, I have a duplex near Newark NJ that I purchased 4 years ago under my name, and have since turned into a rental a couple years back. I'm thinking about doing (my first) 1031 exchange into a 4-6 unit property. Before I begin the 1031 I'd like to transfer this property into an LLC so that my replacement property will be under an LLC, rather than my name.

Does anyone know if this could cause any issues with 1031 requirements? My worry is that since this is a brand new LLC that will take ownership of the property, it could cause a problem since there's no history with the LLC? Or is this not something I should worry about? Thank you!

@Suzanne Laird wealth in real estate is built through appreciation, so if you’re not forcing appreciation through renovations then you need to be prepared to wait a long period of time.

Cash flow is needed to help you hold the property long enough to see that appreciation (to cover the inevitable repairs, Capex, turnovers, vacancies, etc.) So I wouldn't buy a property unless I was expecting both cash flow and appreciation.

When you’re older and ready to “retire”, maybe then it makes more sense to cash in on all that equity and buy purely for cash flow. But only you know what your time horizon and goals are.

@Bill Brandt

Hey Bill! When you say you have to spend at least your net sales price, does this basically mean that the purchase price of the replacement property needs to be greater than or equal to the net sales price of the sold property?

In other words, I could use my “profits” from the sale as the down payment as long as the purchase price is higher than the net sales price of the previous property? Thanks!

Quote from @Tom Fidrych:

I think the stated income and subprime credit scores were the biggest factors in the collapse. Nevertheless, it's a lot easier to walk from a property when you have no skin in the game. 

Agreed, it's this line in the article that's concerning to me -   

"If the housing market were to slump, homeowners without a significant amount of equity may have little incentive to keep paying their mortgages, hurting their credit scores and sticking lenders with foreclosed homes."

I'm very interested to see how the trial run goes. 

Bank of America just announced zero down payment, zero closing cost, and no minimum credit score mortgages for Black and Hispanic first-time homebuyers.

https://www.bloomberg.com/news/articles/2022-08-30/bofa-tests-no-down-payment-mortgages-for-minority-communities

I’m all for giving people opportunities, but isn’t this reminiscent of the kind of policies that lead to the 2008 mortgage collapse? Do we have anything to be worried about here?

Hey! Im curious if anyone knows a reputable property manager in the New Haven area that could manage a duplex? 

Bonus question: Is anyone familiar with the Fair Haven Heights area and have an idea of what rent would be around there on a 2 bed unit? I'm not seeing many listings online, or many comps on Rentometer. Thanks!

Hey! I was wondering if anyone has any experience owning small multi-families in the Fair Haven Heights area? I was curious what you think the rent would be on 1 or 2 bed units, specifically for a duplex? I know it depends on the property itself but assuming everything is standard for the area, I'm just looking for a ballpark on rent. I don't see much availability in that area on craigslist or comps on rentometer so I feel like I don't have much to go on. 

Also if you have any experience with property management in that area I'd like to check them out as well. Thanks!

Quote from @Brandon Goldsmith:

I would probably consult your lender on this as opposed to your realtor to confirm. @Nick Sansivero

Apologies - I wrote realtor, I meant lender. It was the lender who said this. Thanks