Author Topic: What Investments Are You Making? (Capital Gains: Real Estate Question)  (Read 467 times)

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Offline JSD

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Looking to avoid capital gains on a house flip.

Quote
1031 exchange. If you sell rental or investment property, you can avoid capital gains and depreciation recapture taxes by rolling the proceeds of your sale into a similar type of investment within 180 days.

One idea: I have a rental property. Can I dump the money made on the house flip onto the principle of my current investment and avoid the capital gains tax? I figure I could do that, then refinance my investment property to a 15 year fixed and pull the money back out if I need to, or just leave it there. I have 20 years left on a 30 year fixed, 5.6%, so it might be worth wild to refi for a 15 year fixed to get a lower rate.

Another Idea: Put it all into a Roth or my 403B. I know I'm capped in this area, 8500 for the Roth, 18,000 for the 403B, I believe, but i'm wondering if that's an option?

I'm not interested in buying another investment property. The only reason I did this deal is because it was too good to pass up. I don't enjoy being a landlord in MA. Right now I'm renting my property well below market rate, while turning a very modest profit, because I have really good tenants that pay on time and keep the place nice.

I'm really interested in advice on this matter and to also hear what other people are doing to build their own wealth. Thanks

Re: What Investments Are You Making? (Capital Gains: Real Estate Question)
« Reply #1 on: November 01, 2017, 06:21:32 AM »

Offline Celtics4ever

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I am holding off investing right now and putting money into savings.   This is not a wise investment by any means but I figure at some point the market will re-adjust and it will be brutal and I plan on getting back in when it does, right now CDs is what I am doing.   It won't build wealth, but it is safe and I think despite all the records the market could be volatile.

Re: What Investments Are You Making? (Capital Gains: Real Estate Question)
« Reply #2 on: November 01, 2017, 08:07:40 AM »

Online saltlover

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You could see if dumping the proceeds into an REIT would count as a “similar type of investment” for a 1031.

Re: What Investments Are You Making? (Capital Gains: Real Estate Question)
« Reply #3 on: November 01, 2017, 10:15:51 PM »

Offline JSD

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You could see if dumping the proceeds into an REIT would count as a “similar type of investment” for a 1031.

Not sure what an REIT is but i will research it. Thanks

Re: What Investments Are You Making? (Capital Gains: Real Estate Question)
« Reply #4 on: November 01, 2017, 10:45:21 PM »

Offline Erik

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You could see if dumping the proceeds into an REIT would count as a “similar type of investment” for a 1031.

Not sure what an REIT is but i will research it. Thanks

A reit is a type of fund that invests in real estate investment companies (commercial property companies like Malls, rental properties, etc.). The idea is that you get to invest in real estate without the headaches of fixing toilets and you stay liquid. Its more for people that don't have time to get into real estate but want to add a bit of it into their portfolio.
« Last Edit: November 01, 2017, 11:05:53 PM by Erik »

Re: What Investments Are You Making? (Capital Gains: Real Estate Question)
« Reply #5 on: November 01, 2017, 11:07:41 PM »

Offline footey

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1031 would not work with a REIT. To do a 1031, you have to acquire real property interest. Ownership interest in a REIT is a security, which is personal property not real property.

Re: What Investments Are You Making? (Capital Gains: Real Estate Question)
« Reply #6 on: November 01, 2017, 11:22:32 PM »

Offline green_bballers13

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Looking to avoid capital gains on a house flip.

Quote
1031 exchange. If you sell rental or investment property, you can avoid capital gains and depreciation recapture taxes by rolling the proceeds of your sale into a similar type of investment within 180 days.

One idea: I have a rental property. Can I dump the money made on the house flip onto the principle of my current investment and avoid the capital gains tax? I figure I could do that, then refinance my investment property to a 15 year fixed and pull the money back out if I need to, or just leave it there. I have 20 years left on a 30 year fixed, 5.6%, so it might be worth wild to refi for a 15 year fixed to get a lower rate.

Another Idea: Put it all into a Roth or my 403B. I know I'm capped in this area, 8500 for the Roth, 18,000 for the 403B, I believe, but i'm wondering if that's an option?

I'm not interested in buying another investment property. The only reason I did this deal is because it was too good to pass up. I don't enjoy being a landlord in MA. Right now I'm renting my property well below market rate, while turning a very modest profit, because I have really good tenants that pay on time and keep the place nice.

I'm really interested in advice on this matter and to also hear what other people are doing to build their own wealth. Thanks

1031 is a good route for flipping, but it's not as liquid as you're rolling proceeds into the next property. I think you'd want to consider whether you want to do multiple flips (as a business), or just do one here or there. That might help determine your tax strategy and which vehicle will get the job done.

REITs are interesting, but are much different investments. They are much more passive and less risky. I'm less interested in this route than flipping.

We've done a couple flips and made much bigger returns than what we've seen with the S&P. More than can be expected by a REIT. At the same time, we assumed more risk, work, etc. Obviously, if you purchase a property in a good area, you won't have to worry as much about the resale value.

In an efficient market, you should be able to generate a return commensurate with your risk appetite.
« Last Edit: November 01, 2017, 11:33:34 PM by green_bballers13 »

Re: What Investments Are You Making? (Capital Gains: Real Estate Question)
« Reply #7 on: November 01, 2017, 11:44:02 PM »

Offline JSD

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Looking to avoid capital gains on a house flip.

Quote
1031 exchange. If you sell rental or investment property, you can avoid capital gains and depreciation recapture taxes by rolling the proceeds of your sale into a similar type of investment within 180 days.

One idea: I have a rental property. Can I dump the money made on the house flip onto the principle of my current investment and avoid the capital gains tax? I figure I could do that, then refinance my investment property to a 15 year fixed and pull the money back out if I need to, or just leave it there. I have 20 years left on a 30 year fixed, 5.6%, so it might be worth wild to refi for a 15 year fixed to get a lower rate.

Another Idea: Put it all into a Roth or my 403B. I know I'm capped in this area, 8500 for the Roth, 18,000 for the 403B, I believe, but i'm wondering if that's an option?

I'm not interested in buying another investment property. The only reason I did this deal is because it was too good to pass up. I don't enjoy being a landlord in MA. Right now I'm renting my property well below market rate, while turning a very modest profit, because I have really good tenants that pay on time and keep the place nice.

I'm really interested in advice on this matter and to also hear what other people are doing to build their own wealth. Thanks

1031 is a good route for flipping, but it's not as liquid as you're rolling proceeds into the next property. I think you'd want to consider whether you want to do multiple flips (as a business), or just do one here or there. That might help determine your tax strategy and which vehicle will get the job done.

REITs are interesting, but are much different investments. They are much more passive and less risky. I'm less interested in this route than flipping.

We've done a couple flips and made much bigger returns than what we've seen with the S&P. More than can be expected by a REIT. At the same time, we assumed more risk, work, etc. Obviously, if you purchase a property in a good area, you won't have to worry as much about the resale value.

In an efficient market, you should be able to generate a return commensurate with your risk appetite.


Does the 1031 apply to to an investment property I already own? In other words, can I sell this house flip then dump the profits onto the principle of a current investment property and avoid capital gains?

Re: What Investments Are You Making? (Capital Gains: Real Estate Question)
« Reply #8 on: November 01, 2017, 11:53:29 PM »

Offline green_bballers13

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Looking to avoid capital gains on a house flip.

Quote
1031 exchange. If you sell rental or investment property, you can avoid capital gains and depreciation recapture taxes by rolling the proceeds of your sale into a similar type of investment within 180 days.

One idea: I have a rental property. Can I dump the money made on the house flip onto the principle of my current investment and avoid the capital gains tax? I figure I could do that, then refinance my investment property to a 15 year fixed and pull the money back out if I need to, or just leave it there. I have 20 years left on a 30 year fixed, 5.6%, so it might be worth wild to refi for a 15 year fixed to get a lower rate.

Another Idea: Put it all into a Roth or my 403B. I know I'm capped in this area, 8500 for the Roth, 18,000 for the 403B, I believe, but i'm wondering if that's an option?

I'm not interested in buying another investment property. The only reason I did this deal is because it was too good to pass up. I don't enjoy being a landlord in MA. Right now I'm renting my property well below market rate, while turning a very modest profit, because I have really good tenants that pay on time and keep the place nice.

I'm really interested in advice on this matter and to also hear what other people are doing to build their own wealth. Thanks

1031 is a good route for flipping, but it's not as liquid as you're rolling proceeds into the next property. I think you'd want to consider whether you want to do multiple flips (as a business), or just do one here or there. That might help determine your tax strategy and which vehicle will get the job done.

REITs are interesting, but are much different investments. They are much more passive and less risky. I'm less interested in this route than flipping.

We've done a couple flips and made much bigger returns than what we've seen with the S&P. More than can be expected by a REIT. At the same time, we assumed more risk, work, etc. Obviously, if you purchase a property in a good area, you won't have to worry as much about the resale value.

In an efficient market, you should be able to generate a return commensurate with your risk appetite.


Does the 1031 apply to to an investment property I already own? In other words, can I sell this house flip then dump the profits onto the principle of a current investment property and avoid capital gains?

As far as I'm aware (not an attorney), you're rolling profits into another investment without creating a taxable event. The taxable event is when you are done investing. There are time constraints: 45 days after close to ID 3 properties of interest, and max 180 days in b/w sale of one property and purchase of the second. This is for someone that wants to be a semi-active flipper.

Re: What Investments Are You Making? (Capital Gains: Real Estate Question)
« Reply #9 on: November 02, 2017, 12:27:27 AM »

Offline Somebody

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Edit:wrong thread