Author Topic: Real Estate - To hold or sell my high equity position?  (Read 1333 times)

Arizonian

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Real Estate - To hold or sell my high equity position?
« on: August 30, 2016, 02:49:57 PM »
Hey MM Community,

First post, fairly long-time reader. I'm seeking input regarding a decision to hold or sell my Townhome which I currently live-in with a roommate whom will be moving out by the end of 2016. If I could hypothetically keep my roommate who is a long time friend that I trust with great confidence, I'd ride out my situation forever as my mortgage is $1000 with HOA and I've got him paying $450 + splitting utilities.

Background:
Purchased home for $150,000 in 2011
Currently owe: $120,000
Improvements: $50,000
Estimated Sale Value: $320,000

I'm wondering if you all think it'd be a good financial / life decision to cash out on the equity? I'd be looking to invest a large portion of the proceeds into Mutual Funds / Stocks along with having cash available to buy another ShortSale or Foreclosure property. My logic is that the Arizona real estate market has been heating up last few months and may reach its yearly pinnacle come October-ish as it normally does. I truly feel I'd be able to find another great value property to take advantage of to live-in for a few years and then sell.

Other info about myself- I'm 29 with no kids, just transitioned into a new career in IT Leasing / Financing and feeling good about it thus far, however having a large cash reserve would help me sleep easier. After recently renovating the house, I'm left with around $30,000 in savings and have a measly $9000 invested in my IRA at this point. No other investments to speak of, no car payments and live a relatively frugal life- Money Mustache style!

For peace of mind in having cash reserves and the ability to take advantage of other investments, do y'all think I'd be wise to sell the home if I could get top market value? I'd have an estimated $175-$185K after Seller Fees tax free to play around with.

Thanks for the input.

Best,
Arizonian

retiringearly

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Re: Real Estate - To hold or sell my high equity position?
« Reply #1 on: August 30, 2016, 02:54:52 PM »
Any profits that you don't roll into another piece of property will be taxed.  You should look into a 1031 exchange.

https://en.wikipedia.org/wiki/Internal_Revenue_Code_section_1031

tonysemail

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Re: Real Estate - To hold or sell my high equity position?
« Reply #2 on: August 30, 2016, 03:00:21 PM »
this is not a rental property, so IRC 121 should exclude all the capital gain up to 250k.

FWIW - I think harvesting capital gains can be a good idea.

Arizonian

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Re: Real Estate - To hold or sell my high equity position?
« Reply #3 on: August 30, 2016, 03:02:41 PM »
Thanks for feedback! In talking with a family friend who is a CPA- he mentioned that up to $150,000 capital gains are tax free since this has been my primary residence for over the last 5 years.

In a perfect world, If I had higher cash reserves I'd rent the property and buy something else to live-in. This situation could be possible in the future if I cashed out on existing properly (Buying a rental / a second home to live in)

Thanks,
Arizonian