??? about Realestate sale(not car Related)

[Pantera]

Sorry guys, this is not car related.

I do need to find out just what the pros and cons of selling some of my rental Real eatate that I have owned for 30 plus years. I can't get reliable renters anymore. They just trash the places and move on. They have nothing that I can go after them for and expect to get any $$$$ out of them. It is just not worth the worry and hassle much less the expense to take them to court.

I have held on to these rental houses as my retirement plan since I have been self employed all my life. I don't know what uncle sam will take if I sell them. I bought the first one when I was 17 (1964) and the second in 1970. I kept the first one as a rental and lived in the second one. I made every payment on it till it was paid off. It was a great rental for many years and it always made its own payment. But nowadays, people can own their own too easy and the only ones that want to rent are either worthless or someone that just wants it till their new house is built and will not stay even 6 months.


Over the years I kept renting out the last house and moving into a nicer and bigger one. I am not rich, like some on this forum. I work everyday and work hard in the hot sun usually. This year I turned 60 and can see that I have to slow down. I am not getting any younger. At this time, I am working on the houses one at a time in a effort to update them since they had gotten pretty rundown and dated which made them not too desirable to rent. At lease this is the feelings and thoughts of those that care for me. So I will try fixing them up in a effort to get them all rented and either way that will make them easier to sell when the time comes.

I went through a devistating (emotionally and finiancally) divorce back in '95 and just let everything go till I almost lost everything to the tax man. I had a huge settlement to repay and thank God for my Mother coming to my aid. I am just now getting back on my feet finiancially and then, boom here came 9-11 and the whole economy went to ###t again.

Enought sob story, my question is for instance if one of these houses is worth say $100,000 just how much will uncle take if I sell it? It is totally depreciated out over the years on my tax return and are paid for. At lease I don't owe anything on them. I did pay payments on it for years and took the interest as a writeoff. I am sure that what ever I sold it for would be considered all income. I know I can sell it and finance it and take less of a bite but that will not let me replace it with something different to make me a income now, if I retire. I am looking into a like kind exchange for a comerical property as one option but I need this info to help me make a decision that way.

I would like to build a new building to keept my cars in and would have to sell one of my houses to pay for it. No way could I make it a rental as I want to build it on the back of my home.

Over the years they always made me about 10 to 15% per month of what they were worth. I gave up a lot of new cars and vacations to hold on to them thinking they would make me a nice income for my retirement. Who would have ever though the economy would go so out of sight as it has lately.

I used some of the earnings from them to buy one commerical property that is now rented out and it has saved my bacon these last few years. I would like to keep them and get them all up and rented and that is the plan for the rest of this year. If they don't stay rented then I will have to make a decision on what to do with them and this is why I am asking this question.

Now it looks like my car collecton is my only hope to have something to retire on someday after I get near 70. But then I would not have them to play with and that is also hard to have to consider, but I have to make sure that they survive me as they are rare cars and important to the hobby.

I have no formal insurance retirement plan except these houses and cars. I was planing on the houses providing a modest living for me and that would allow me to play with the cars for a few years till my health forced me to dispose of them.

Any thoughts would be appreciated. feel free to use a email if you perfer.

Please guys no offers to take care of my cars for me. this is a serious request and I have no local finiancial advisor that is in the know about the tax thing.

Thanks for your time to read this.

Pantera http://www.yenko.net/ubbthreads/images/graemlins/smile.gif

[olredalert]

Larry,

------Feel for you as we have some of the same thoughts and problems up here in Michigan... Would holding the paper on the houses be any better than selling them outright? Just a thought.........Bill S

[YENKO DEUCE REGISTRY]

The properties are held as investments, and when sold will produce a long-term capital gain that will be taxed as income at the LTCG rate.

The expenses incurred throughout the years to maintain the properties were (should have been) used to offset the rental income, provided the rental income exceeded rental expenses in at least one year of a three year period.

The only way to avoid paying the capital gain when a property is sold is if it is your primary residence - and you roll the amount of the sale into your next primary residence. I think there's an age limit in there as well, but regardless, this provision won't apply.

[Pantera]

I think I got the answer I needed but to answer your question I would need the money now to build the new garage. Carrying the note would not allow me to do what I want to do with out having to go seak financing on it for myself. Also since it is not a business expense i could not write any of it off.

Thanks
Pantera

[Pantera]

This is not my primary residence. But in that light is there not a one time exclusion for sale of your primary residence? I have held on to it the last 15 years planing on the sale of it to avoid the fact it may be worth a full 1/3rd more than I paid for it back in '89 when propery was cheaper. I was going to wait until I was retired and over 65 before I sold it. It may be worth as much as 4 times what the rentals are worth.
http://www.yenko.net/ubbthreads/images/graemlins/dunno.gif

I appreciate your inpuit. Can you tell me what the amount would be on one of these houses if it was a $100,000 outright sale? I know it depends on my income bracket.

Thanks

Pantera

[YENKO DEUCE REGISTRY]

I believe the exclusion amount is related to the sale of your primary residence. If I remember correctly, the first $250k of capital gain is excluded.

I defer to Jim Hughes for the gritty details, but they have made it difficult to capitalize on the gains without paying the taxes. The current 401k's have pre-tax contributions, but are taxed when withdrawn - theoretically at the lower tax rate in effect upon retirement.

[TMagda]

Pantera,

The exclusion is on your primary residence, $250k if single, $500k if married. It is not a one time exclusion anymore. It is available every 2 years. Maybe you can sell your primary and live in a rental?

[YENKO DEUCE REGISTRY]

TMagda - thanks http://www.yenko.net/ubbthreads/images/graemlins/biggthumpup.gif I'm rusty on my tax law - on purpose http://www.yenko.net/ubbthreads/images/graemlins/grin.gif

[SamLBInj]

You own these rental houses outright? Would you like to borrow against them or even get full time high dollar rentals? Your actually in a pretty good situation. http://www.yenko.net/ubbthreads/images/graemlins/wink.gif
Geeze I sound like an informercial http://www.yenko.net/ubbthreads/images/graemlins/smirk.gif http://www.yenko.net/ubbthreads/images/graemlins/grin.gif

[71SSNova]

Long term capital gains is 15%. Since you have written them off over the years, your capital gains will 100% of the selling price minus the cost of repairs you have not completely written off.

As far as your primary residence, you have to declare it as your primary residence for 2 of the last 5 years and you do not have to pay any capital gains nor do you have to reinvest it in another residence. I did not know there was $$ limit as TMagda mentions.

So if you do not mind moving every 2 years you can escape paying any capital gains.

There is another approach called a 1031 exchange and a reverse 1031 exchange. This entails selling your property(s) and buying another like and similar property for more than the selling price of the other. This has to go through a lawyer or campany that holds the money for you. If you want more details on this, email me at [email protected]

I've been into rental business for 15 years and have another 11 to go so I watch this pretty close.

Best bet though is to find a good real estate attorney in the area to completely fill you in.

[Pantera]

I know about the exchange and the pitfalls it has if not done by an attorney. Sometime I have to quit buying more and divest myself of some of them. The return on them has been so bad the last 10 years that I am considering selling them and putting the money into interest bearing investments where I don't have to go mow the grass every 10 days.

I also want to build a 3 to 4 thousand sf building on the back of my home to keep the car collection in. This would keep it close where I would be able to work on them more often. The building I have now is just not big enough. I need to have it for my business and a seperate place for my work on the cars.

I hate the idea of moving every 15 yr much less every "2". I have been here since 1989. It is good to know that the money from it is mine to keep if I should sell it. I think I might be able to double my investment on it as it was a repo when I bought it.

My problem is that I like the area and it has grown so much that I could not afford to buy a different house nearby and come out with enought to build the building as big as I want on the back. I only live 1 mi from where the Powertour stopped here in Tulsa two years ago. Mine is the smallest house in the neighborhood at 4,800 sf. Everything that I have looked at is more expensive or larger and/or doesn't have a lot big enought for the new building.

If I move I want to downsize to 2500-3000 sf with 1 acre lot. That is something that is just not avaiable around here.


I want to thank you and I do appreciate your inpuit.

Pantera

[Pantera]

If I was younger I would be real interested in growing them and refinancing them. But, as I am nearing retirement and really want to scale back my work load from now on, I really want to set back and not have to worry about making a payment again. I have worked for them for a lot of years and now it is time for them to work for me. I just need to decide which is the best avenue to persue.

I want to just take it easy like Charlie does.

I know I will never be in his leage but I don't owe anybody and the next two years are going to be devoted to getting around to all the little things I have been putting off.

Especially the Motions and my Pantera

Thanks

Pantera

[YENKO DEUCE REGISTRY]

Sell the properties, pay the tax, and invest the money in a mixed bag of investments like Roth IRA's, etc.... If you are in business for yourself, you may have opted for the self employed version of the 401k plan (?)

[71SSNova]

If the name on the deeds of your property is in the business name, you can do a 1031 and use the money to build the building you want as long as it stays in the business' name. You then rent the building from the business at a loss.

It's more of a headache than I'd want but it might be way to keep some of the capital gains.

Personally, in 11 years, I'll be doing as Marlin suggest. Uncle Sam will get a good share but figuring the tenants have paid for the properties..., oh well!! I'm not babysitting anymore at 60.

It will be time to start spending and enjoying more.

[YENKO DEUCE REGISTRY]

Shor sent me a good link with an easy example of how this tax provision works:

http://www.washingtonpost.com/wp-dyn/articles/A5783-2004Jun25_2.html

[Pantera]

Thanks that explanins a lot.

Pantera

[indyjps]

my father has quite a few rentals and found out the hard way about non paying renters etc. he has since developed a working relationship with the sheriffs dept and a few judges and gotten a good lawyer that he happens to rent office space to. good luck with your decision.

[John]

..check this website out ....this guy is on Talk Radio alot ...and has some good advice http://www.yenko.net/ubbthreads/images/graemlins/biggthumpup.gif
..
http://www.crunchman.com/crunchman/index.html
...

[Pantera]

Thanks that is some good advice.

Pantera