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REAL ESTATE ADVICE

kimbalee

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REAL ESTATE ADVICE



I know from the threads there are many landlords, investors, homeowners, lenders, realtors etc. on RDP. I need advice plz.

Scenario: we have a half acre horse property rental house in Sky Country, Jurupa Valley. Renter pays $2050/mo. We bought it for $230k, owe ~ $100k on it. Could sell it for $500k. We are looking to get out of Cali in 2-3yrs when kid is done with college. Looking at northern NV (for retirement tax reasons).

Dilemma: We don’t want to pay the ridiculous Capital Gains tax on it. Not going to move into it for 2 years so my question is what do we do? Someone suggested now is a good time to pull ALL the equity out of it and so when we do go to sell it there won’t be very much equity left to tax on it bc the profit won’t be significant. Will probably pay off moho, some college costs and start looking for property in NV (not ready or prepared to do the 1031 exchange in 60 days or whatever it is).

What does the brain trust recommend?
 

COCA COLA COWBOY

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1031 exchange you just need to identify a property within 45 days and close within 180. If you pull the equity out, you will still be on the hook for capital gains unless you can provide documentation of spending the money on the property (invoices of some sort).
 

boatpi

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Just 1031 property where you are going to retire, then you still have income. By cashing out you will not have payments, just small if any gains.
 

Havasu blue label

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Just sold my Havasu house .do to the stay at home order there is a different time frame 1031 my opinion is not a good move take your money and have a good tax team
 

satellitemike

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Let me know what you find in N NV.
We were going to look there later this year for possible retirement spot as well.

Good luck with the search and RE dilema!
 

kimbalee

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Let me know what you find in N NV.
We were going to look there later this year for possible retirement spot as well.

Good luck with the search and RE dilema!
We have done a lot of research and for many reasons decided on the Gardnerville-Minden area. The problem is the property prices are increasing rapidly bc of the volume of California corporations (Tesla, Google, Yahoo etc.) fleeing to Reno-Sparks area - not enough supply for the demand.
 

530RL

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Capital gains on the first 39,375 of income is 0 and the rest will be taxed at 15%.

Tax rates going up, versus down, when the US has very large deficits is probably a safe bet.

Make the decision based upon economics, not taxes.

Never let taxes get in the way of an economic decision as the only thing worse than owing a bunch of tax, is not owing any tax at all.........
 

Hypnautic

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If you are not ready to 1031 out of this property..
Cash out now and buy home in N.NV as investment property. You can also buy it as 2nd home to get better rates but you are not supposed to rent for first 12 months per article 6 of the Deed. After that 12 months you can rent it out.
Once you are ready to leave Ca then re-examine the sale of this home. May make sense to keep it, 1031 or straight sale it.
I think it would be best to use the equity now to buy at today’s price vs. the possible price of that home in 3 years from now
 

SKIDMARC

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When I spoke with my accountant you only pay capital gains if your profit is more than 500K. So if you owe 100K and sell for 500k you should be ok.

Just list the property some how as your primary residence if possible.
 

SoCalDave

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Buddy of mine bought a new home in Gardnerville, NV about two years ago as he was planning on retirement. Just sold his Norco home about a month ago and made the move up there. Damn nice country up there.
 

BajaT

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With so many unknowns approaching, seems like a good time to sell and hold....Risky trying to time future events with all that is going on to including an election. A nice profit is gteed now....
 
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Rajobigguy

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When I spoke with my accountant you only pay capital gains if your profit is more than 500K. So if you owe 100K and sell for 500k you should be ok.

Just list the property some how as your primary residence if possible.
Pretty sure that does not apply to rental properties, only primary residence. If I'm wrong then I'm going to sell and get the hell out Ca. now.
 

lbhsbz

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Pretty sure that does not apply to rental properties, only primary residence. If I'm wrong then I'm going to sell and get the hell out Ca. now.
As far as I know, regardless of the use of the property, if you live in it for at least 2 out of the last 5 years, the 250K/500K exemption applies. If you have not lived in the property for 2 of the last 5 years, then you do not get the exemption.

I lucked out that my tenants are moving out of the house I rented them in Oct. 2018...It will go on the market on the 20th of this month and I will be cap gain tax free on the profits.
 

530RL

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As far as I know, regardless of the use of the property, if you live in it for at least 2 out of the last 5 years, the 250K/500K exemption applies. If you have not lived in the property for 2 of the last 5 years, then you do not get the exemption.

I lucked out that my tenants are moving out of the house I rented them in Oct. 2018...It will go on the market on the 20th of this month and I will be cap gain tax free on the profits.

As long as it was your "primary residence" for two out of the last five years. For example if it was your second home, it would not qualify.

You can prove primary residence and should keep:

  1. Utility bills from while you lived there.
  2. Copies of tax returns with that home on the address section.
  3. Copies of voter registration and vehicle registrations with that home address.
  4. Letters from pastors or doctors.
  5. Affidavits from former neighbors that state you lived there for a certain period of time.
 

mesquito_creek

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If you bought for 230 and sold for 500 (minus commisions and fees) netting 470K your captial gain would be 240K. If you waited until Jan 1 of the first year of retirement and could defer other retirement income, the first $78,750 of your income is exempt from Cap Gains. Your cap gain is now 161, 250 taxed at 15% and you owe 24,187 in taxes. Assuming your could live off the 240 minus taxes your effective tax rate for year 1 of retirement would be about 8%.... Paying taxes at the rate of 8% is a problem many of us wish we had... As 530RL stated, paying taxes is the only way you actually can gauge that you are making money....
 

76sanger

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Buddy of mine bought a new home in Gardnerville, NV about two years ago as he was planning on retirement. Just sold his Norco home about a month ago and made the move up there. Damn nice country up there.
It is beautiful up in that area! But its changing rapidly, to rapidly as a matter of fact. It's not for the better unfortunately. Once again its alot about the political voting agendas.
But like you said, damn nice country!
 

Groper

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I would hold onto the rental , lots of tax advantages...just sayin
This ^^^ without more details, I would not sell a Ca property, if you can swing it REFI take some money out where your comfortable as if the property was empty for a period of time between tenants like a rainy day fund and you had to pay the mortgage that would be close to the monthly rent..
Use the refi money towards your new home in NV, set up your Ca. home as a rental and depreciate it, it will help offset taxable income.
Depreciation is your friend :)
 
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Buster Wrench

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Sounds like you need tax advise with some retirement planning?


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530RL

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If one wants to get out of CA and the associated taxes and filings, but want to keep a rental property, why not exchange it into a N.V. property?
 

Deja_Vu

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If you haven't lived in the rental you are considering selling for 2 of the past 5 years then i would do the 1031 exchange to NV.

I really like the Minden , Gardnerville area myself. I have noticed how inflated the prices have become.

Just dont buy a place anywhere downstream from the Tesla factory...
 

Shlbyntro

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So heres a question for a tax person. I have a SEP IRA that I like to pidgeon hole money into come tax time to bring down my taxable income. Any money I put into it isn't taxed until it comes out (presumably after I retire years on ahead). I am allowed access to the first $10k penalty free for the purchase of a house. The rest of it, I have to wait until i retire or pay a 10% penalty on however much i pull out. Since the OP is already so close to retirement, could they not put the profits from the home sale into a SEP IRA as a temporary tax shelter and only pay basic income taxes on it as they pull it out after they retire? Does capital gains income even qualify for the SEP IRA tax deferment?? Curious as to how that would work
 

mesquito_creek

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So heres a question for a tax person. I have a SEP IRA that I like to pidgeon hole money into come tax time to bring down my taxable income. Any money I put into it isn't taxed until it comes out (presumably after I retire years on ahead). I am allowed access to the first $10k penalty free for the purchase of a house. The rest of it, I have to wait until i retire or pay a 10% penalty on however much i pull out. Since the OP is already so close to retirement, could they not put the profits from the home sale into a SEP IRA as a temporary tax shelter and only pay basic income taxes on it as they pull it out after they retire? Does capital gains income even qualify for the SEP IRA tax deferment?? Curious as to how that would work
There are a bunch of income limits on IRAs regardless of the type i.e. sep/roth/traditional. But regardless you have to earn the income via a job to contribute to them. Even if they could do what you are asking (which they can't), most likely "basic income taxes" are higher than the 15% on cap gains, so this would not shelter anything. So to answer your question, "does cap gain income qualified for IRA contributions" the answer is most definitely not.
 

mesquito_creek

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Cap Gains taxes are very simple and well under stood by the IRS and the legislature that writes the laws around them. They are pretty black and white, so unless you plan on committing pure tax fraud and lying and/or trying to hide them, there isn't much to do but try to "time them" by cashing them in at a time where you can lower your effective rate.

For example, you have to tack on 3.8% to the 15% for a grand total of 18.3% if you are married and make more than 250K combined. So you might wait for you or your spouse to have a bad year or quit their job and take them in the filling year you are under 250K and save 3.8%.

Its a cost of real estate investments that few people discuss in the "you should just rent it out" threads...
 

Mandelon

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How about this scenario?

Do a 1031 Exchange into the new house you want. Rent that new house out for a year and travel around in the moho. Then after your epic adventure, give notice to the tenants and move into it. I'm pretty sure this is all legal and legit. Timing can be tricky, as you only have 180 days to identify the property. But it should be doable.

Alternatively you could retire. Then actually move into the Jurupa house. But maybe you just into a corner of the garage... LOL and get some room mates. Stay there in your motorhome. The roommates continue to use the bedrooms inside, but technically that address would be your home. You need to have your bills and voter registration sent there. Do that for two years out of the next five. Its not exactly following the spirit of the law, but are roommates against the rules? I think not.
 

HNL2LHC

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How about this scenario?

Do a 1031 Exchange into the new house you want. Rent that new house out for a year and travel around in the moho. Then after your epic adventure, give notice to the tenants and move into it. I'm pretty sure this is all legal and legit. Timing can be tricky, as you only have 180 days to identify the property. But it should be doable.

Alternatively you could retire. Then actually move into the Jurupa house. But maybe you just into a corner of the garage... LOL and get some room mates. Stay there in your motorhome. The roommates continue to use the bedrooms inside, but technically that address would be your home. You need to have your bills and voter registration sent there. Do that for two years out of the next five. Its not exactly following the spirit of the law, but are roommates against the rules? I think not.
This was the one option that was out there for us for our rental property that we did not want to live in for 2 years. We just ended up purchasing a home in Havasu and keeping the rental. We will deal with the rental some point down the road if needed. WE are just letting it all ride...
 

kimbalee

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Sounds like you need tax advise with some retirement planning?


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100%. I searched the forum in the past and I remember someone saying you need to find someone who is a certified independent financial advisor. I failed miserably finding one. I did find one in Riverside (we r in Corona) but she would only see govt clients (calpers). I got so frustrated I gave up. So if anyone knows any one good in the IE, please speak up. Thanks.

Edit: Our money is all managed by Vanguard and I'm not changing that. That was another obstacle I had - these "advisors" like Edwin Jones, Schwab etc. want to manage your money for a %. I don't want that - I want a one time sit down with an advisor, lay out the assets and plan and get solid advice. Kinda like y'all gave me lol
 
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