Co-written by Andrew Feldman, PC.
Are you a property owner that wants to sell their condo, investment property or needs to rent an apartment or retail space in New York City? Call or text me: Sam Moritz, licensed real estate agent, 203–209–3640.
Do you know a property owner that might need real estate help? Refer me! I provide great and professional real estate services across all five boroughs.
Real Estate Agents, and investment and co-op and condo owners, often hear things like 1031 Exchange and Capital Gains taxes when it’s time to sell their property.
Recently, I was talking to a landlord in Bushwick who wanted to sell a building of his and reinvest closer to his house in New Jersey. But he wasn’t sure about the process when it came to doing a 1031 Exchange. Could he buy out of state? What type of property could he buy? What were his options if he didn’t want to buy a new building? What could he do with the leftover money if he bought a new property which was less expensive than the one he sold?
I had another property owner, who owned a single family home in Bushwick, ask me similar questions.
Capital Gains Taxes will play a part in the sale of your property. And if your property has had its value increase substantially, you may have a large tax bill, even if you have poured tons of money and effort into managing the property.
There is one big workaround, if you want to continue investing in real estate: a 1031 exchange, the process of swapping one “like-kind” piece of property for another.
This past week, I had the opportunity to connect with Real Estate Attorney Andrew Feldman, PC, headquartered out of Mineola, NY, who handles a lot of 1031 transactions for his clients throughout New York state. He’s been an attorney in New York for 38 Years and had some great things to say
(Call Andrew @ 516-747-2828 if you’re looking for a great real estate attorney in New York, and call me at 203-209-3640 if you need help selling your property and buying another one in NYC).
Firstly, here some things to know about “like-kind” exchanges:
- You can buy out of state.
- If you’re selling an investment property, you could buy a condo – if you intend to rent it out consistently and not use it for personal use. Using it for any other use could create a potential red flag audit, as is Andrew’s opinion.
- You can buy an apartment building or mixed-use building.
- Shopping Centers, smaller Strip Centers, or buildings with triple-net leases, like a 7/11 or Starbucks, could also be a viable purchase.
Andrew said that these triple-net leases could be good options if you want to reduce the amount of time and money required in managing the property, as all building obligations become the responsibility of the Tenant – but there could be a smaller return on your investment than if you bought a new rental building.
Another investment option that Andrew mentioned: sellers can look into investing in a Delaware Statutory Trust – a real real estate ownership structure where multiple investors hold interests in the trust, using the funds to invest in Percentage ownership interests in Large Trusts that hold title to the same types of properties described above. This would require basically no time or management on your part, but he did mention, however, could lead to a smaller return, because there will be up-front and management fees.
Capital gains taxes should also be on your radar if you own your home. If its value has increased significantly: your gains up to $250,000 are exempt from being taxed if you’re single, and if you’re married, you’re exempt up to $500,000.
In terms of the process of selling and buying something else: many title companies have services available where they will hold the proceeds of your sale in an escrow account. But the clock is ticking – after selling, you only have 45 days to identify a property to buy, and then 180 days to complete the transaction. There are no exceptions to these very strict timelines.
One last thing to consider: if you sell your investment property, and there’s a mortgage on it, you must buy another property that also has the same amount of mortgage on it. If you fail to do this, the payoff of that Mortgage at Closing is considered boot (the equivalent of cash in your pocket) and is taxable.
Anyway, selling your property is a big decision, and it’s important to be ready for what’s to come after.
Then again, maybe if it’s appreciated a lot, and even if you’ll have to pay a large tax bill, maybe even after paying your bill, perhaps something like the stock market could be a good vehicle to invest in. Then you’d have to manage nothing, really.
If you need help selling (and buying) something else in NYC, I hope to help you this year. I have been an agent in NYC for eight years with EXR.
If you need an experienced attorney, don’t hesitate to reach out to Andrew Feldman by telephone, or email Andrew@Feldman114.com.
Are you a property owner that wants to sell their condo, investment property or needs to rent an apartment or retail space in New York City? Call or text me: Sam Moritz, licensed real estate agent, 203–209–3640.
Do you know a property owner that might need real estate help? Refer me! I provide great and professional real estate services across all five boroughs.
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