All Forum Posts by: Account Closed

1. I lived in it for 7 years, rented it for 3 years, now living back in it (to avoid capital gains tax if I sell). It is my primary residence but still in an LLC (owned by me solely)…. just don't want to pay to have it moved out. Please correct me if I'm wrong about assuming I'll have no captains tax on up to 250k profit/single bring that I'll be living in it as primary 2 out of 5 years.

2. I’m thinking Austin just isn’t for me anymore. The lot is large with 3 new ~million dollar homes on each side and back. Condo regimes are popular here and I’m thinking maybe converting mine to a condo regime and sell either the back lot or the front lot with house and keep the other. How would this affect my capital gains taxes I’m trying to avoid? I’d be selling only part of the property (or both if it made financial sense). Any idea how much legal fees and headache having a condo regime set up would be?

My goal is to get the most $$.
TIA

I can only speak to the legal side vs tax.

The condo regime is easy to get in place and a very popular investment strategy. Not too expensive - a few thousand. But it greatly increases the total FMV of the property.

Message me and I can refer you to a very good attorney here -- I call her the condo queen

Thanks

Alan

Super! Who do you recommend? I have contacted one the other day but have been able to speak to her. TIA

0 Votes

Austin, Texas

Quote from @Account Closed:

Quote from @Michael Plaks:

Quote from @Account Closed:

So you lived there for 7 years, rented it for 3 years and then lived in it for another 2 years. This is a total of 12 years, 3 of which (25%) were renting. You can exclude 75% of your gain, not 100%. This comes from the sneaky "non-qualified use" rule that is often forgotten about, even by CPAs.

And depreciation recapture is an additional tax liability. Bottom line: you will reduce your taxes by moving back into your former home, but you will not wipe out your entire tax hit.

Wait, don’t I just consider the last 5 years which means I lived in it 2 of 5 years which means I qualify to not have to pay any cap gains (unless over 250k single)? I didn’t know there was a % calculation you either qualify or don’t qualify?

I will never forgive you for this Michael, I looked thru 523 and it seems your methodology is applicable if your property, at one time, is used as a rental and primary (like you leased on some land on you property, or a unit while living there). I’m not expert though. Here is what I found:

Space formerly used as business or rental.

Note that space formerly used as business or rental will qualify for exclusion under section 121 if the space was converted to the taxpayer’s principal residence for a total of 2 years or more, as long as the use as the principal residence was within the 5 years leading up to the sale. See Regulations section 1.121-1(a). However, depreciation deductions claimed during the previous business use must be reported on line 5a of Worksheet 2 and recognized as unrecaptured section 1250 gain. No separate Business worksheet is needed because there are no current business expenses. See Regulations section 1.121-1(d). See also the Instructions for Form 4797, and the Instructions for Schedule D (Form 1040).

0 Votes

Austin, Texas

Quote from @Michael Plaks:

Quote from @Account Closed:

0 Votes

Austin, Texas

Quote from @Benjamin Weinhart:

1. I'm not too sure about a Captains tax, for that I would refer you to your local seaman :)

Kidding aside, yeah that's fine, assuming you meet the other requirements of Sec. 121 such as not having utilized the exclusion during the two-year period prior to the sale of the property in question, among others. Do note that you will still owe some tax in the form of depreciation recapture for the time that the property was used as a rental property. This amount should be fairly small though (low 4 figures if I had to guess).

2. I'll let someone else speak to the condo part as I'm unfamiliar with those specifically as it relates to Texas. For the tax side of things, the exclusion is available for the "home" meaning that if you sell one and keep the other, you'd have to sell the front lot - but the back lot could also be eligible for the exclusion even if they're sold on separate dates (potentially back lot sold first too), provided it meets a few additional criteria. You'd want to enlist the help of a CPA/EA who can help you plan it out since there's a lot more than the standard 121 exclusion involved if you go this route.

Regardless of your path forward, I encourage you to reach out to a tax professional who can assist and advise with your specific circumstance in order to make it more personalized to you. Also, IRS Publication 523 goes into more detail on this if you wanted some light reading material. :

Thanks Michael. I think I rather stay home and sew my head to the carpet than read a IRS publication.

1. I don’t believe my tax bill for depreciation recap would be that high but who knows, every April 15th is like a bad birthday surprise.

2. The condo regime sounds like it could be a bit of a headache but if I could make a few more $$ it MIGHT be worth it.

0 Votes

Austin, Texas

Hello, I have a property in booming east Austin.

My goal is to get the most $$.
TIA

0 Votes

Austin, Texas

For a property I have in an LLC.... I'm writing my Operating Agreement and was wondering what y'all use as the "Initial Contribution"?

I could use the $100 I put into my LLC bank account, the initial value of $400k when transferring the property into the LLC, or some other number. Is there a benefit to using a higher value or lower value for the "Initial Contribution" in the Operating Agreement?

Thanks!

0 Votes

Quote from @Bill B.:

Make sure this is allowed. I only looked at 2 properties and it was 10+ years ago. But one required a minimum of 50 weeks of rental availability. The other doubled the already insane Hoa fee ($1050’mo to $2100 TEN years ago) and still required 6 months of rental availability.

Of course both could only be rented through the hotel and they took 50%. You also couldn’t redecorate as all rooms had to be as close to identical as possible.

Seriously be careful. Not only is financing hard the value should be 50% less than a normal condo but sellers rarely if ever value them that way.

In Las Vegas there is a complex that only allows owner stays for a few weeks a year unless the owner is willing to pay nearly double in association fees. The one I am looking at doesn't have limitation or requirement however, if i do use the hotel to manage the rental in the future (although not required) the cut they take is about 50%.

0 Votes

Las Vegas, Nevada

I own a property in Austin ( just east of downtown). It use to cashflow but with taxes and the market rent rates now I break-even. Holding for an equity exit strategy still though. I don't think that is a bad strategy, it's great to have it all... cashflow, appriciation but sometimes appreciation alone can be better than both in the long run, imo

1 Vote

I'm planning on making an offer on a condo-hotel in Vegas. This will be my primary residence (at least for awhile) and might become a rental/hotel unit later. This isn't my part of my investment portfolio so I'm not expecting to cashflow. Anyhow....

I'm told that I can't get conventional financing and would be required get a DSCR loan, put 30% down at have a rate of 8-10%. Does this sound right?

I anticipated maybe a 20% downpayment and a loan rate a bit over conventional financing?

The property is in Neveda, I'd be happy to get recommdations for another mortgage broker.

Thanks!

0 Votes

Las Vegas, Nevada

All Forum Posts by: Account Closed

Account Closed has started 3 posts and replied 10 times.

Post: Living in rental and converting to condo regime

Post: Living in rental and converting to condo regime

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Post: Intial Contribution in Operating Agreement

Post: Condo-hotel Purchase Financing

Post: Investing without cashflow - Austin MTR

Post: Condo-hotel Purchase Financing