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I have sold $495 thousand worth of real property in a qualified exchange and have 15 days remaining to identify a replacement piece of real property to defer the gain. I have a zero basis in the property. If I do not defer the gain, I will pay 195K in combined taxes, leaving me with 300K.
I have an option on the Virginia property and am leaning in that direction. My understanding is that after two years I could covert some or all of the property to personal use. (Part time rental, part time personal use for vacation etc.)
The zero basis is a result of depletion. It's not technically a zero basis but recapture of the depletion
I’m seriously thinking about purchasing (for 100% cash) a piece of land on the bay in Virginia Beach, VA. The purchase price would be $465k.
a saysThe zero basis is a result of depletion. It's not technically a zero basis but recapture of the depletion
Are you talking about depreciation recapture? How does one get to zero that way? You can't depreciate land, only buildings. The rate is 25% for the recaptured depreciation and 15% for capital gains. Is there some kind of really squirrly alternative rules for ETF real estate?
Rich without a RichFuck advisor? Was this an accident?
Patrick says
I’m seriously thinking about purchasing (for 100% cash) a piece of land on the bay in Virginia Beach, VA. The purchase price would be $465k.
Why Virginia Beach?
No “Rich” advisor means no “stock broker poker”... that’s where your experience and his money becomes his money and your experience.”
Strategist saysPatrick says
I’m seriously thinking about purchasing (for 100% cash) a piece of land on the bay in Virginia Beach, VA. The purchase price would be $465k.
Why Virginia Beach?
Family reasons. Might convert to seasonal rental down the road.
Buy the property, then buy a few Tiny Houses on wheels and put them on the property, rent them out on Airbnb for $150 a night.
Buy the property, then buy a few Tiny Houses on wheels and put them on the property, rent them out on Airbnb for $150 a night. When you're ready to unload the property, sell the Tiny Houses separately and sell the property.
Patrick saysThat's a cool suggestion.2. Two and a half undeveloped acres on an inlet of the Chesapeake Bay in Virginia for $480K. The tax rate is 1%. It’s a nice neighborhood with good schools. However, I would have to build a rental house or hold it for sale down the road.
Buy the property, then buy a few Tiny Houses on wheels and put them on the property, rent them out on Airbnb for $150 a night. When you're ready to unload the property, sell the Tiny Houses separately and sell the property.
reader,So true.
Life's a gamble. We never know if our decision is correct until after the fact.
Good Luck!
Of course some are born to be landlords but I certainly would not want to take on such an enterprise. And of course there is always more risk there as well although it may pay much more if done right.
If you have over 5 million in liquid assets, why the hassle to become a landlord to maximize profits? Unless you want to hand over a highly profitable business to one of your kids, I'd just stay with dividend yielding assets and diversified stocks (all sectors), funds/ETFs (long and short), precious metals and cryptocurrencies and enjoy life instead of dealing with assholes. Of course some are born to be landlords but I certainly would not want to take on such an enterprise. And of course there is always more risk there as well although it may pay much more if done right. I'd save the time for myself and put the money to work in non-time consuming endeavors, esp. with many millions at hand. Good luck!This is exactly the sort of advice that I like hearing from Patrick.net. You don't get it everywhere. If I don't buy this or another piece of real property, I will have a huge tax bill. I'd prefer to defer that under the exchange rules. Real property is a hassle, but I think I might put up with the hassle to defer 195K in taxes. Thanks for your insight.
Strategist saysSniper saysBuy the property, then buy a few Tiny Houses on wheels and put them on the property, rent them out on Airbnb for $150 a night. When you're ready to unload the property, sell the Tiny Houses separately and sell the property.
It's a great idea. Certain to yield powerful returns.
How come I have to think of everything around here.
The guys I know putting them on Airbnb are making some decent money.
#investing