Author Topic: does it make sense to 1031?  (Read 1304 times)

pato

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does it make sense to 1031?
« on: December 01, 2013, 11:11:26 AM »
Ok Mustachians, I am trying to figure out if it makes sense to sell a rental property in another state, and purchase another right next store to my house. We might be able to come up with some of the cash shortfall but I am hoping the current owner of the new potential property(or a family member) will finance some of it. I can not get conventional lending as taxable income is to low. These are somewhat round numbers and values are based on Zillow's zestements. My cash flow amounts to not include mait., tax, or ins. Im assuming these numbers will be somewhat of a wash in a new property.

Any thoughts would be very much appreciated.

Thanks


House #ís


Current Value out of state home:                  $131,776

What we owe on out of state home:                  $41,864

6% sale cost:                     $7,900

Transferable equity:               $82,012

New potential property value:            $228,000
      
Cash shortfall:                  $145,988

Monthly payment on entire cash shortfall @ 6%:      $1620,77

Current out of state house mortgage:                $522.00

Current  out of state house rent:               $800.00

Current cash flow:                   $278.00

New property potential rent:            $1200

Mortgage payment required to cash flow $278:   $922

Mortgage amount required to cash flow $278:      $83,000

Cash necessary :                  $62,988


 
« Last Edit: December 01, 2013, 11:16:15 AM by pato »

Another Reader

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Re: does it make sense to 1031?
« Reply #1 on: December 01, 2013, 11:46:40 AM »
First of all, why would you buy a house for $228,000 that can only generate $1,200 a month in income?  That's a losing proposition from the start.

Second, if you are asking about a 1031 exchange, you must provide information on how much capital gain will be realized on this sale and how much depreciation must be recaptured.  My guess is that if your income is low enough and the taxable amount of the recapture and the gain is relatively small, it would not make sense to bother with a 1031 exchange.  Real numbers will tell the story.