$85,000 Profit! Now What? - Posted by Shawn

Posted by A Miller on December 06, 1998 at 21:15:51:

Great Advice. Keep your capital intact and don`t give
it to the Government.

$85,000 Profit! Now What? - Posted by Shawn

Posted by Shawn on December 03, 1998 at 21:47:02:

I own two houses (one is my primary residence), and will be closing on a third shortly. FMV for the three combined is around $140,000. I will have approximately $55,000 in combined loans.

I have purchased the two investment properties using creative techniques, thanks for the advice you all gave me. My intent is to sell all three homes and purchase a new primary residence for my wife and I. It has always been my goal, and dream, to walk in, pay cash, and own my house debt free. Then I would start the investment process again. I know this is not what most of you would do, but this is the way I really want to do it.

Is there a way to roll the $85,000 profit from the sale of the three homes into my new home w/o the capital gains hit? Or is there a better way? I need your input.

Re: $85,000 Profit! Now What? - Posted by Rob FL

Posted by Rob FL on December 03, 1998 at 22:27:00:

2 things. Just because you have 85,000 in equity don’t think you are going to walk away with that much in cash. There are such things as closing costs. Even with no realtors involved, you are probably still going to walk away with only 75-80K if you are lucky and get FMV on all three. Remember your 85K is all on paper right now.

Second, why tie up all your cash in a house. I would rather have that cash in the bank or invested making money for me than have it all tied up in a house that gives me zero in cash flow. I know it is great to be out of debt and own your home free and clear, but there is also something to say for living below your means and having cash flow.

Best wishes in your ventures.

Re: $85,000 Profit! Now What? - Posted by Rick Vesole

Posted by Rick Vesole on December 03, 1998 at 23:00:07:

While paying cash for a house may not be my first choice, it is a reasonable thing to do. Remember, by paying cash for the house, Shawn will not have a house payment. That represents cash flow, since that money is no longer going out the door.

Since it is important to Shawn that he pay cash for his home, I say go ahead and do it, but also take out as large a home-equity loan line of credit as he can get. That way if a great investment comes along, he has the ability to jump at it. Having the ability to buy quickly with cash may not be particularly creative, but it is a great way to get a bargain on a property from a motivated seller that needs cash in a big hurry.

As far as avoiding capital gains taxes, the only thing that Shawn can do is to do a 1031 exchange, but this would necessitate him renting out the replacement home for a while, before he converts its to his personal residence.