All Forum Posts by: Will R.

@Dave Foster Ah... Intent is where it gets really fuzzy. I purchased this house because it was a great investment but I live in it as my primary residence. I will be selling the house as a primary residence. That leaves a lot that was previously attached to my primary residence which was purchased as a part of a "primary residence investment". That side yard was mostly unused because I never cleaned it up enough to use as a yard. 

Just noticed that I think I made a nube mistake here. I guess I was reading in Investor Deal Diaries and when I created this story it was posted in that category. Anybody know how to retag/recategorize? 

@Rob Beland Thanks for the reply! The piece I was wondering about with the 1031 was whether somehow having owned the land for the last few years would somehow qualify me if I consider the land an "investment". I have found the rules to be fuzzy around this kind of thing in what I have read. 

@Marian Smith Good thoughts, especially on the risk of missing the top of the market. I had not thought about it from that perspective. I think the odds of the market rising over 2 years are as good as falling here in Austin. I do have young kids which will probably put some wear and tear on the place but we would probably move out and touch up before going on the market. The biggest fear I have is that there is a buyer out there somewhere who is willing to pay an extra $100k to have it new. I would never do that but I do not understand the psychology of the new home/car buyer. That theoretical $100k would be enough to pay my capital gains tax bill and I would have that cash/credit to work with immediately instead of holding it in my primary for 2 years. 

I spent a long time looking for an existing thread on this but could not find one. I have been a reader for a long time and this is the first time I have created a thread because every other time I have found one. Here is my situation:

I purchased a house a few years ago from a hoarder and got a great deal. It is a large lot in central Austin. I am am now finishing subdividing the lot to build new on what was the side yard. What I am wondering is what people think about living in new construction as my primary for 2 years to avoid gains/income tax. The main question I cannot find data on is whether the value of a home drops when it is not brand new. Obviously, when you drive a new car off the lot it loses most value. Homes are not that extreme, but how much so? How much more do people want a brand new home vs a 2 year old home? Also, how does the my capital gains exemption work if I keep the subdivided part of the lot?

Estimates: I purchased at $355k. I have around $50k in on renovations from when I purchased and will put another $100k before sale. I think the existing house will sell somewhere around $900k. Will hopefully not pay any taxes on that transaction because it is my primary. Then, we will build new on the vacant lot we subdivided off. I am uncertain what the return will be but I estimate $150/sf on construction and $350/sf (conservative) sales price over 3000sf. I could clear around $600k. 

It seems like a no brainer to try to shelter that from the potential of income tax by living in it. Does that sound right? Does anyone know if a 1031 would work in this situation even if I have not rented it out? 

Thanks in advance for your thoughts.