Author Topic: Does a 1031 Exchange even make sense (for me)?  (Read 918 times)

PseudoStache

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Does a 1031 Exchange even make sense (for me)?
« on: May 30, 2017, 03:59:40 PM »
Background:

I have a property that I purchased for around $130K in 2011.  Can't remember the structure value off the top of my head.. but let's just say it was $110K for the sake of depreciation math.
It is now worth about $290K.

There is currently a mortgage on the property of about $190K - Took cash out last year to purchase another property.

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When I first heard about 1031s, I though they were magical beasts that helped you eliminate capital gains... but it sounds like they are really just a tax deferral tool if you want out of a particular property and into higher valued property(ies).

They also seem like a frickin' hassle to do - especially in my case with an existing mortgage.

I feel like this home has "peaked" in it's current form.  It's in good shape for a 60+ year old home.  But to get top dollar for this property, a complete reno would need to be done... and I'm not sure the ROI is there.  Now a complete tear down/new build could net a ton - but that's not for me - right now.

Let's say my basis is about $116K
Forecasted selling costs of $18K
With a sales price of $290K, it would seem my gain would be $156K?

I'm not completely opposed to a replacement property - but I believe it would be difficult for me to find one that I'd be happy with... and I'd have to go out and get another mortgage.
And even if I found a way to make it happen, I'm just deferring the taxes that I'll have to pay down the road. 

Ideally, I'd just like to take that money and roll it into a mutual fund or even a REIT - but them taxes though.

Does anyone have any good strategies for me?