Posted by Andy on November 12, 2006 at 14:40:30:
LOL, i dont like to type any more than you, i meant to say the SFR was worth 265k-270k!!!
Barter Exchange-Trading Real Estate? - Posted by Andy
Posted by Andy on November 11, 2006 at 09:56:11:
A home builder approached me about a property he had for sale that my wife and I would like to live in. He has had a hard time selling the property and wanted to know if we would be interested in trading my rental property for his house. It could be a straight trade as there both worth about 270k. I would have about a 50k gain in about 9 months on my rental and I’m assuming he has little to no gain.
Any ideas on how I can get around paying income taxes on my 50k gain? I would talk to my accountant if we got closer to pursuing this.
Somebody mentioned that a “Barter Exchange” might work? Suggestions.
Re: Barter Exchange-Trading Real Estate? - Posted by BTI
Posted by BTI on November 11, 2006 at 13:23:33:
Andy
The barter exchange won’t avoid your tax obligation, you can only defer that through a IRC 1031 exchange.
Don’t assume he has little or no gain. He might have as much equity as you, or at least a lot more then you think. And you can reduce the selling prices, thus the gain accordingly.
Finally, consider a delayed escrow to get you past the one year mark so you only have a long term capital gains to pay taxes on.
BTI
Re: Barter Exchange-Trading Real Estate? - Posted by andy
Posted by andy on November 11, 2006 at 19:25:43:
dont think a 1031 would work unless i made it a rental first.
he has a little under 270k in liens on the property.
Wouldnt a delayed escrow defeat the purpose for him. Yes he would be selling it but he would have to wait another 4 months to sell it.
Re: Barter Exchange-Trading Real Estate? - Posted by BTI
Posted by BTI on November 11, 2006 at 23:04:17:
Andy
I guess I need to type longer answers but I hate to type. My 1031 answer was just to say that is the only way to defer gains, no deferral for barter deals.
The suggestion of the delayed esrow was to put you into long term capital gains. What’s to stop you from buying his property on a lease-purchase, escrow to close after your year is up and he takes over your rental at that time. My question would be how is he going to give you the equity in your rental without you carrying a note? What are the liens on his property and what is the probable market value of the property?
I don’t know where your located but this is the slow season so what are the chances of this builder finding a buyer and closing escrow before the 4 months are up? Seems he is the guy under the gun and maybe his lender will do a short sale.
Actually maybe I shouln’t be making suggestions until tommorow morning when I have had a few cups of coffee, and of course complete details would make it easier on all of us so we don’t have to shoot into the dark and hope we hit something.
BTI
Re: Barter Exchange-Trading Real Estate? - Posted by Sailor
Posted by Sailor on November 11, 2006 at 19:42:39:
Just because the other guy has 270k in liens does not mean you have to pay that. I have a MH deal closing this week & the SELLER is bringing almost 7k ca$h to the table because I am buying for less than the mortgage. Figure out what he is paying per month because he has NOT sold, then you’ll have an idea how much he wants this deal. I recommend you never assume you know what price the seller needs, especially based on what he owes. Also, do not assume his property is worth what he owes. If it was really worth 270k, he would have already sold it, & don’t forget it could be worth even less before winter is out. He knows that. I do not recommend taking advantage of his precarious position, but go into this w/eyes wide open. You could be the seller’s White Knight, especially if maintaining this property is putting others in jeopardy (& I bet it is). And yes, a 1031 should work if you use the new SFR as income property initially. Make your deal contingent on approval of your CPA & attny. Good luck & happy bargaining!
Tye (who thinks you ought to @ least get landscaping & a deck on the deal, 'cause it costs more than you think to finish off a brand-new house)
Re: Barter Exchange-Trading Real Estate? - Posted by Andy
Posted by Andy on November 12, 2006 at 10:24:24:
The builders property has been for sale for about 11 months. He started asking 299k. Then he dropped to 289k. Now he’s at 281k. He sold a virtually identical property in the same neighborhood for 296k a year and a half ago. Actually, this other property had another room that was not a bedroom.
The story with my property is that it needs about 25k in work, regrading to correct some water issues and some other things. The problem is that the regrading that is needed could cause foundation settling according to the engineer which would then cost big bucks(50k). Engineer said there is probably a 25% chance that I will need to put the big bucks into this property after the initial 25k.
The neighborhood this house is in has a lot more houses for sale than buyers. Like many areas, it has been a sellers market here for the the past 6-12 months. This house is a lower end house in a higher end neighborhood.
I’m located in columbia, mo.
Thanks for the advice.
Re: Barter Exchange-Trading Real Estate? - Posted by Sailor
Posted by Sailor on November 12, 2006 at 10:57:02:
You’ve told me the seller is motivated & that you are, also, & that this is a buyer’s mkt. However, you still haven’t stated the value of the house. Previous selling prices may have nothing to do w/current value (or better yet, value come the end of Feb). I do like that the home is more modest than its neighbors–as long as you buy it r-i-g-h-t. Do you know all of the costs you have in the multi-family? I hope it works for you if you decide to do this–@the very least you w/have learned a lot. Good luck!
Tye
Re: Barter Exchange-Trading Real Estate? - Posted by Andy
Posted by Andy on November 12, 2006 at 11:33:38:
I think this house would sell NOW at 165-170k.
On the apt., I bought it for about 213k plus a couple k for closing costs. To date, all the rental income has covered the general maintenence costs. I owe about 177k on the apt.
Re: Barter Exchange-Trading Real Estate? - Posted by Sailor
Posted by Sailor on November 12, 2006 at 12:02:00:
So you would be significantly in the hole on the deal on an even exchange; i.e. you’d be paying c. 215k + all your efforts on the multi-family for a SFR worth 165k. Gonna have to sharpen your pencil down to the nub to make this one work, kid–
Tye