I have a rental property in NYC. 4.25% interest rate and was until recently positive cash flow. Recent major HOA assessments and upcoming repairs are going to create a negative cash flow loss for several years. If I sell the place I'll need to buy another property with a 1031 exchange. Otherwise I get heavily taxed on appreciation. The mortgage interest rate will be much higher, probably 7%. Not sure if I can break even on a new property at those rates. Should I hold my rental or sell my rental to buy another?
unless you are looking to cash out and spend that money, continue to do 1031 for life to expand your RE profile.
How much equity do you have in the property?
600k, 300k mortgage
So ~900k total value? Hmm if you were to put that 600k towards a ~1M spot in a decent to good neighborhood you might be able to break even but not sure if itâs worth doing if youâre just barely dipping under break even. How much more time left on the mortgage?
Hahaha landlords in these situations realizing they canât just collect a free pay check.
It looks like you have some appreciation on your property. Itâs a good idea to tap into some of that equity - either by selling or by taking a HELOC. The usual way to shelter gains from a real estate sale is by doing a 1031 into one or more deals. They can be single or multi-family properties which are like kind exchanges. Iâve done 1031s from my single family rentals to multifamily properties which usually have better cashflow and are more passive. The other alternative is to go the way of using bonus depreciation to offset some of your capital gains. Bonus depreciation is possible on multifamily and other commercial properties. There are nuances with each method and youâd want to work with someone who has done it before or a tax/real estate attorney. Not tax advice, please do your own due diligence.
When itâs time to sell, sell. No hesitation. Money has to move quick. There will always be other opportunities.
Sell and pay the tax.
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Sell at a loss to someone who will live there and stop investing in real estate
Real estate makes me sick