All Forum Posts by: Tyler Till

@Mark W.

Wanting to make sure I have all my expenses factored in for the sale of a home.

Back story: Me and my girlfriend bought a condo in Durango, CO May 2017 for 248k as a primary residence. We are wrapping up a remodel now and will be relocating back to Denver this coming June. We have talked to our realtor and looked at comps in the area and will be listing the home for 290k. For the sake of numbers lets assume we get asking price of 290k for the sale.

6% for realtor fees = 17,400

Closing costs = 1,500

Mortgage Payoff = 232,000

That leaves us with 39,000 after closing.

Now the part that I am uncertain of is how and if we would be hit with capital gains tax. It would fall under Long term capital gains since it is over a year, which would be 15%. But I've read info saying that with the new tax brackets if you are in the 10-15% tax brackets you do not owe capital gains (we each file single, her income 30k, mine 55k). I've also read (and not quite understood) that for certain reasons you could also be exempt such as selling home due to relocation. So if you could help me out and let me know what I am missing that would be great! 

Also the remodel of the home cost 7,000 in expenses. I was also curious if mortgage payments and utilities would count as holding costs towards expenses to lower the taxable income on capital gains.

It will more than likely be just over a year, aiming for June for putting on the market. 15% is a reasonable price to pay, thanks!

Originally posted by @Nicholas Aiola:

@Tyler Till Using your numbers, your basis would be $255k ($248k purchase price plus $7k in improvements). This does not factor in costs of selling the property, which will be added to your basis. Let's say you sell the property at $315k. Your gain would be $60k. Debt payoff is irrelevant in computing gains.

If you sell before May 2018 (under 1 year holding period), you will pay tax at your ordinary rates. If you hold the property for over a year and then sell, you will be taxed at the more favorable long-term capital gains rates (likely 15%).

One important note - you cannot do a 1031 exchange on your principal residence.

@nicholasaiola I live in Colorado, and bought a condo in May of 2017. We have lived in the property and remodeled over the year. The plan was to rent out the home but prices have risen and this Home would make a nice profit for sale now. If we bought for 248k, had 12.5k down, and spent 7-8k on improvements. And selling price ends up being 305-325k. What kind of capital gains would we be paying? I’m aware of 1031 exchange, but some of the sale profit would go towards debt paydown, and the remaining profits would be a nest egg being built for future property.

The words rough/poor neighborhood and crime riddled are kind of red flags to me. But with that being said I don’t know that market specifically. Are there similar rentals near by you can base rates and ease of ownership off of? Will you have to worry about break ins? What kind of crime reports are in the neighborhood? Can you justify those headaches for the amount of cash flow you’d receive?

As others have stated, that $1,000/mo net will be drained very quickly after factoring prop management, repairs, vacancy, tax’s, etc. maybe not repairs for the first year or two since it’d be a new building but they would be inevitable in the future.

@Mark Hughes I am aware of the crazy prices in Durango. We bought our place May '17 for 245k. Remodeling it currently and then planning to put it up for rent in the 1900-2100/mo range. If things get messy or renting just doesn't work out over that first lease term I don't think there will be an issue selling the home for 280-299k. As there are very few homes under 300k and if any do come up for sale they do not last long. 

Nice job, the remodels looks very nice and the water proximity is a nice plus.

Jens Nielsen thanks, I’ll be sure to look into the meet up. And will let you know if I have questions.

@Jens Nielsen thank you for the offers. When does the real estate group meet up usually? And do you do any investing in Farmington area at all?

Thanks everybody, I’ve started skimming through contacts in areas I’m interested in for future investments. Currently focusing on debt knockdown (consumer and small student loans) and the home remodel. Then going to investment savings from there out.