Tripp's Take on Real Estate | Avoid This Tax | Episode 59
I had someone ask me yesterday how I come up with the content for my email. After explaining my process, I reiterated that I love covering questions from my viewers (YouTube, Facebook and Instagram) and readers (email and blog).
Because if you’re asking it, someone else is too.
But at the end of the day, I don’t want to get so off topic that it isn’t useful to you. Frankly there’s a lot of repetition when it comes to real estate, whether as a homeowner, investor, renter or buyer. So if you’re not hearing something you have a question about, make sure you chime in so I can address here.
Today I’m going to keep it fairly basic. We’ll look at items surrounding home maintenance, cash for properties, capital gains on the sale of personal or investment properties (and how to avoid the tax in the first place) and then wrap with our mortgage rate update.
Welcome to the second full week of the new year. Let’s kick things off.
Sellers: Avoid this Tax at all Cost
Let me set the stage. First, I’m not an accountant and I’m not a tax attorney. And I don’t play one on TV. This shouldn’t be construed as tax advice. Talk to the appropriate professional to get their input. Second, I am not advocating you not paying your taxes.
What I AM saying is if you can avoid a tax altogether, you should absolutely do it - unless you enjoy sending your hard earned money to Uncle Sam to get flittered away on some innocuous priority.
There are two scenarios I want to cover here: the sale of your personal home and the sale of an investment property.
Please pay attention to the next couple of statements.
If you are selling your personal home and have no interest in becoming a landlord, no sweat. The capital gains tax for married individuals is avoided altogether for gains up to $500k or $250k for single individuals.
If your gains are above that, I’m slow clapping for you. Congrats! Consult your tax professional for any gains above $250k and $500k.
However, if you’re thinking about becoming a landlord, pay attention. The rule is that to avoid paying capital gains, you must have lived in the property two of the past five years.
So tick tock.
If your plan is to get those three years of renting the property out while hopefully seeing values climb to sell for more money, good plan. But, execution and timing is key.
Because if you go beyond the three years and one minute, congrats you’ll be paying the tax.
The second scenario is you have an investment property to sell. Lots of different factors and direction here. Perhaps your personal residence became an investment property and you didn’t sell within that three year timeframe.
Whatever the situation, to avoid the tax, you’ll want to do what’s called a 1031 Exchange (it’s a provision in the tax code).
This 1031 Exchange allows you to roll the proceeds from the sale of that property into another of like kind.
There are a number of strategies here that can propel you into a larger, hopefully more profitable property.
Whatever your need, please don’t sell a property without knowing your options…only to get a tax bill you weren’t expecting.
I’m surprised the number of property owners who don’t know this. Reach out to discuss options and a strategy for your needs.
Need Cash for that Property?
Most times, getting top dollar makes sense when selling - at least that's my goal pretty much all the time as a Realtor®.
However, other times call for immediacy, urgency and the luxury of preparation to sell for top dollar isn’t an option.
Or maybe there’s no desire or drive to fix up a property in order to get the maximum sales price, ie you inherited a home and neither time nor funds allow you to prepare the home adequately for top dollar.
For those uncommon times, it may be helpful to have the option to get a cash offer.
If you have one of these situations where you’d like to get a cash offer for a property pretty much anywhere and in any condition, reach out. I have several resources to be able to offer a cash, close to retail price offer.
Often, cash is king. Othertimes, cash is cash. Let’s talk how I can help with your situation.
Home Maintenance Tip
If you’re reading this email today, Tuesday January 9th, it’s probably raining wherever you are. As I type this, the sump pump is going off in the background.
A friend of mine just this past week, I call her my second mom - long story but I’ll tell you over coffee - just shared on facebook that her basement completely flooded because of the sump pump failure.
If you’re in a basement situation, and you have a sump pump, please grab your calendar and make two entries in it six months apart each year to check and make sure it works.
These pumps generally last for ~10 years.
To engage most of the sump pumps, you can either pour several gallons of water directly into the pit, or you can pull the pump float up until it engages. If you’re getting nothing, you should call a plumber to come take a look.
Because if you’re going through today without a working sump pump, as the famous line from the 1986 movie, The Fly, says: "Be afraid. Be very afraid."
Don’t live in fear. Do this small but important home maintenance tip today.
Mortgage Rate Update
The mortgage interest rate (at close of business Monday) on a $500k home (with 20% down and a credit score of ~750) for a 30-year fixed-rate mortgage is 7.094%.
This is the first uptick I’ve seen in several weeks. Nothing super significant, but we’ll be watching to see if we’re any shift in either direction is continuing.
We saw the Fed release their job numbers last week with mixed results. On this YouTube short, I ask the question of how these numbers impact our real world numbers. Take a minute to watch that video and share your thoughts.
That’s all I got for you today. I'd love to get your follow up comments and questions.