scot and friends, would appreciate your opinon.

if you have a rental condo (own, not owe on, ergo, no tax shelter), would it be "better" to simply sell, pay the tax and invest the remaining cash into bonds or some managed account? i figure you wouldn't have to deal with property tax, assoc fees, managing the prop, collecting rent, screening tenants, etc.

am i missing something?

 

Depends on what kind of returns you're seeking for your money.

Pays to stick with real estate if you're knowledgeable and know good brokers. People who sell properties usually move up and buy bigger/more expensive properties. If you buy the next one within a certain time period (12 months I think), your taxes are deferred. It's called a 1031 exchange.

Real estate is more work as you've noted but it has the opportunity to bring you a much higher return than other investments. It's up to you on how much work you're willing to put in.

 

dy: ask yourself what your goals are short and long, just like Cal said. You can pay someone to manage your property if you don't want to handle it. I would rather pay because it can be time consuming.

 

1031's are fairly hard in my opinion..... you only have 45 days to identify the next property (from the time you sell your current property) and then 180 days to settle.... if you find a decent "exchange company" they will be lienent on the 45 days thing, but it is still not easy with so many people into real estate right now. the new property has to exceed what is in the 1031 or part of the exchanged property becomes taxable.

[QUOTE=CalBear,Jan 1 2007, 10:14 AM]Depends on what kind of returns you're seeking for your money.

 

that's the thing. the properties have appreciated and i think they will be going down or at least no going up.

doing an exchange is annoying because all it does is get you into a bigger more expensive place. you continue to pay and you have more equity, but it feels locked up. not to mention the property only gets older with wear and tear.

how about this question instead? how would you proceed to make good money if you already had a rental property? cuz letting it sit there, already appreciated and collecting rent can't be the best way.

 

thanks scott, that was my question. however, that's the situation now. great tenant, but the return on investment isn't great after paying taxes and assoc fees. like i said, the prop value seems to have levelled off and when this tenant leaves, i bet i wont find another like her. so is there a way to make more money like selling it to leverage it or heloc or something? i wanna learn.

my originaly thought was just to sell and take the liquid cash to invest. hassle free.

 

ahahah... and i deleted my post because i thought I totally missed what you were asking.... doh.

 

in any case, the question still stands, what moves can u make to benefit the most from the situation?

thanks

 

Well, IMO, 1031's are not that difficult. A good accountant can get all the paper work filed in no time. Like Scot stated above, though, there are time restrictions, but you do the hunting before you initiate the 1031 . You line all the ducks in a row, then they all (hopefully...a lot of things can go wrong in real estate transactions) just fall into place. The key is to get all teh certifications for closing PRIOR to actually putting a contract for exchange in on the property (a "gentlemen's agreement" if you will).

As far as requiring to trade up in value, that is impossible, as at two properties are most likely not equal in value. I think you are referring to the receipt of "boot" in the transaction. In this case, the gain is only taxable to the extent "boot" (aka - NON-like kind property such as debt relief or cash) is received. As long as you do not trade down to the original purchase price of the property, some of the gain will be tax free. And what little gain there is will most likely get Long Tern Capital Gain treatment at 15%, which is most likely at least 10% lower than your marginal tax rate.

dy - have you considered incorporating the ownership of the condo? It sounds like its mostly investment anyways. That way you would be able to deduct all the association and maintenance related expenses, on top of taking depreciation (on Real Estate, this can generate some nice paper losses, but is recaptured upon sale (but that is when a 1031 exchange can help)). If you elect REIT status, there are some preferrential policies towards real estate income (particularly in the calculation of net income). You would also gain the lower marginal tax brackets of a corporation while limiting your personal asset exposure to condo related debt.

John

 

sounds like that making things more complicated than they already are. thanks for the advice, but im looking for the simplest method.

how about this rephrased question:

why not sell, pay the tax and just invest in liquid vehicles?