Exit Plan? (by bet [MA]) Sep 21, 2021 9:02 AM|
Exit Plan? (by Dodge [PA]) Sep 21, 2021 9:26 AM
Exit Plan? (by Homer [TX]) Sep 21, 2021 9:36 AM
Exit Plan? (by WMH [NC]) Sep 21, 2021 9:40 AM
Exit Plan? (by bet [MA]) Sep 21, 2021 10:02 AM
Exit Plan? (by Sisco [MO]) Sep 21, 2021 10:11 AM
Exit Plan? (by Bet [MA]) Sep 21, 2021 10:34 AM
Exit Plan? (by Oregon Woodsmoke [ID]) Sep 21, 2021 10:35 AM
Exit Plan? (by myob [GA]) Sep 21, 2021 10:41 AM
Exit Plan? (by myob [GA]) Sep 21, 2021 10:46 AM
Exit Plan? (by bet [MA]) Sep 21, 2021 11:03 AM
Exit Plan? (by P.B. [MI]) Sep 21, 2021 11:14 AM
Exit Plan? (by Robert J [CA]) Sep 21, 2021 1:51 PM
Exit Plan? (by Pmh [TX]) Sep 21, 2021 5:26 PM
Exit Plan? (by Rosie [VA]) Sep 21, 2021 6:07 PM
Exit Plan? (by LisaFL [FL]) Sep 21, 2021 7:44 PM
Exit Plan? (by Ray-N-Pa [PA]) Sep 21, 2021 9:32 PM
Exit Plan? (by tryan [MA]) Sep 22, 2021 12:04 PM
Exit Plan? (by Chris [CT]) Sep 22, 2021 3:58 PM
Exit Plan? (by MikeA [TX]) Sep 22, 2021 8:08 PM
Exit Plan? (by Ed [CA]) Sep 22, 2021 10:26 PM
Exit Plan? (by LisaFL [FL]) Sep 22, 2021 11:02 PM
Exit Plan? (by Lucy [IN]) Sep 22, 2021 11:40 PM
Exit Plan? (by Bonanza [NC]) Sep 23, 2021 6:46 AM
Exit Plan? (by LisaFL [FL]) Sep 23, 2021 3:48 PM
Exit Plan? (by Pmh [TX]) Sep 23, 2021 5:55 PM
Exit Plan? (by tryan [MA]) Sep 23, 2021 7:54 PM
Exit Plan? (by Tonia [RI]) Sep 25, 2021 3:50 PM
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Exit Plan? (by bet [MA]) Posted on: Sep 21, 2021 9:02 AM
I am not sure that I have figured out the right exit plan. As we hold on to these properties longer and longer, now at 17 yrs, we can only deprecate so much, till we cant. The deductible mortgage interest gets less and less and so on. We cant do a 1031 exchange on every sale, if the plan is to downside, but we are selling 2 family units and buying single turn key homes in landlord friendly states where the taxes and insurance is less but still room for market growth and rents are high. The first 5 rentals we sold the capital gains were only 8k each. But the 6th rental we are selling the potential capital gains would be 50 k, but we have already identified a new property to do the 1031 exchange. So going forward I am not sure what our best plan is because spouse is 74 yrs old, and we will be needing cash to live on. We still have 14 rental properties. How do we downsize, how to do we avoid capital gains, but in order to have lots of capital we still need the rentals. What can we be doing differently? We have no money in the stock market. Thanks for input. --73.227.xxx.xxx
Exit Plan? (by Dodge [PA]) Posted on: Sep 21, 2021 9:26 AM
Exit Plan? (by Homer [TX]) Posted on: Sep 21, 2021 9:36 AM
I was at a LL meeting a couple weeks ago. The topic was exit plans. The guy was pushing ď irrevocable Chartable TrustĒ. I havenít really studied it . From my memory. You create this trust, donate one of your houses to it, it gets sold within the trust snd you receive up to 8 percent each year of the principal left in the trust until you dieÖ. The trust pays no capital gainsÖÖ I may be wrong on some of the details, so do your own DD --66.169.xxx.xxx
Exit Plan? (by WMH [NC]) Posted on: Sep 21, 2021 9:40 AM
Ah the Exit Plan. That gets discussed here every now and again and everyone's is different.
One thing we never really knew before getting IN was that getting OUT could be so expensive. So our plan is death and leave it for the kids to deal with. All 3 are interested in having rentals so we are parceling up the properties and leaving them each some property - separately - to do with as they will.
For us, though, the income from the rentals far exceeds what we could make in the stock market, and where else can you put your money but real estate or stocks? So we'll keep on with this. When we can't anymore, kids will have to step up and help.
That's all the ideas we've got. --50.82.xxx.xxx
Exit Plan? (by bet [MA]) Posted on: Sep 21, 2021 10:02 AM
Thanks. Its starting to feel like a rotary, one where you hop on and then don"t know which exit to take so you keep going round and round. We did a couple of fun things, and traded up on our primary house and our second second home so that was fun. --73.227.xxx.xxx
Exit Plan? (by Sisco [MO]) Posted on: Sep 21, 2021 10:11 AM
It sounds to me that so far you have handled the downsizing redeployment very well. as for minimizing cap gains when you aren't exchanging, I would think it best to do so on a low income year. Perhaps by expensing (instead of capitalizing)as many items as possible on your new acquisitions (AC, Appliances, water heaters), put the new roof on in the year of the property sale.
Exit Plan? (by Bet [MA]) Posted on: Sep 21, 2021 10:34 AM
In case any younger folks are tuning in, my husband started along with me when he was 54 when we had nothing but his good paying job 40k in 2001. We bought our 1st rental with some friends with a 3k cash advance on a credit card. Only mistake was not starting sooner. We cant convince any of the younger relatives to go the real estate route. --73.227.xxx.xxx
Exit Plan? (by Oregon Woodsmoke [ID]) Posted on: Sep 21, 2021 10:35 AM
The government cancelled my exit plan which was to live in each one and then sell it as owner occupied. So now the plan is to die with them and my heir will pay the taxes. Much more in taxes than the original plan if stepped up basis is eliminated.
Or maybe the government will seize them all and donate them to worthy welfare slugs. A few years ago, I wouldn't have thought that was possible, but things change.
Maybe this entire plan to drive landlords out of business is nothing but a huge tax grab. A way to get all that capital gains tax right now instead of later. --76.178.xxx.xxx
Exit Plan? (by myob [GA]) Posted on: Sep 21, 2021 10:41 AM
Our exit plan continually changes. As you see from your problem it can't remain the same.
The big issue is no mortgages to pay. Depreciation, each year is minimal, so how do you cover the profit? Simplistic as it is "have no profit".
We've tried many routes and considered many options since 86.The laws and tax rules changed many times in 35 yrs and it looks like more rule changes coming. We went from Wrap Around loans to owner financing to holding seconds to limited partnerships.
Our best plan: all the property's are in a family limited partnership (FLP). The plan is when both partners die for the partnership property's to go into the trust and be worked by the corporation. The last wills cover the operation of the trust and our wishes for disbursements.
As I've stated many times here. We have no profit from the rentals. All income is put back into the property's or into employees pay.
Always the basic question: WHY do I need profit? My property's are paid off--- if I need cash I could just post --HERE--- list it as "I have a 170K property that in need to sell". Will take 80K cash. Property is occupied and renting for 1350.00 a month-- currently has tenant.
CASH FLOW PROBLEM RESOLVED. I could do that for 60 months if need be.
Exit Plan? (by myob [GA]) Posted on: Sep 21, 2021 10:46 AM
Bet MA I loved that story. Never to old to start. You did have one flaw in that post. Your brought in friends--- how'd that work out?
We didn't want anyone else involved in our rental purchases or decisions. Biggest issue I always saw with bringing in someone was their work ethic wasn't ours-- nor was their dream OURS. --99.103.xxx.xxx
Exit Plan? (by bet [MA]) Posted on: Sep 21, 2021 11:03 AM
Myob, you know how that worked out, it didn't. Biggest issue their work ethic wasn't ours, we refinance 3 months later, still friends to this day.But you know when you start out, need all the help you can get, and that partnership was the start we needed. I have one 24 yr old nephew, young, strong hard worker, but always trying to go the get rich fast scheme, he hasn't gotten anywhere yet. I cant image him working on rentals 50 hrs a week, painting, hauling trash, sanding floors, ripping up carpet, doing dump runs, ripping down horsehair plaster, old wall paper, unclogging toilets, cleaning sewage from basements, where are those kids now? playing video games, too scared to take a risk. I am talking about my 20-30 yr old relatives. --73.227.xxx.xxx
Exit Plan? (by P.B. [MI]) Posted on: Sep 21, 2021 11:14 AM
Yes, do not go into business with friends.
Last spring we had some good friends (so we thought) that asked us to go to the U.P. on vacation, camping in our RV's.
Which we did. The morning after our arrival, we were asked to go for a ride and we were taken to a cabin on Trout Lake.
As we stopped to view it we noticed it was for sale. Our friends asked us to get out and walk around and then we were asked to "go in with them, as half purchasers." We declined and realized the whole trip had been a set up. Then that evening my friend decided to tell me how much money she and her husband earned each year. I did not ask her. But then she asked me what I brought in. I told her I brought in enough to get by, as it is none of her business. Well, she became huffy and now no longer stops by to see us. Neither her or her hubby.
Friends like that we do not need and we are thankful we saw threw the B U L Sh T.
Exit Plan? (by Robert J [CA]) Posted on: Sep 21, 2021 1:51 PM
Exit Plans! Here are a few methods I've used when disposing of something and trying to limit taxes, fee's and commissions -- totaling almost 40% of the profit.
Single Family Home: Do an installment sale with the buyer putting less than 29% down. Have a pre-payment penalty. Advertise for sale by owner so there will be no broker's commission. You can get over market since you are going to carry back the first mortgage. Charge a medium to higher mortgage rate -- like 5%.
Units: I would do a 1031 exchange into several TIC (tenancy in common properties). Never put all of you eggs in one basket. I sold an 8 unit building and came out with a hefty chunk of change. I then put $100,000 each into 5 different investments. The balance I took out and paid taxes, boot. Then one by one I could sell of a TIC when necessary.
Method 3, take out a new loan and hire a management company to take care of the property. In 20 years you will pay back the loan and the property should double in value. Then you can sell or exchange it away. --47.155.xx.xxx
Exit Plan? (by Pmh [TX]) Posted on: Sep 21, 2021 5:26 PM
interesting & following. I will caution anyone who is thinking of trusts to review with a lawyer who specializes in trusts. trusts was the only open book (prior court decisions) exam when getting my law degree in the UK. very complicated. --107.77.xxx.xxx
Exit Plan? (by Rosie [VA]) Posted on: Sep 21, 2021 6:07 PM
Exit Plan? (by LisaFL [FL]) Posted on: Sep 21, 2021 7:44 PM
Doesnít the stepped up basis actually cost more once you exceed the estate tax exemption threshold?
Sell now and you pay 15% capital gains tax and the recapture depreciation rate which is capped at 25%. The estate tax is 40% on anything exceeding the exemption amount.
Exit Plan? (by Ray-N-Pa [PA]) Posted on: Sep 21, 2021 9:32 PM
Well you can become a less hands on landlord a variety of way.
1) I am pickling up another NNN property in October. In NNN properties, the tenant does the maintenance, pays the insurance and the taxes. These are typically done with national level commercial businesses being your tenants. I know restaurants were torn up around here because of the knee jerk reactions with C-19 so they are cheap now. The beauty about these properties, they can be any where as they are hands off. I have a local food producer set up as a NNN. I picked up a Dollar General in 2020 and this year looks like a Pizza Hut. Doing the site visit on Friday and its about 700 miles away. The DG is about 650 miles away.
2) I bought fractional ownership in some gas wells in a couple of different states with Marcellus Shale and that is mailbox money for roughly the next 15-20 years. They are currently yielding about 17% annually. I do have to file state income tax in these two states.
3) You can purchase a TIC investment in a partnership. A starting out Doc for example, can't really buy a place with $350,000 in student debt so you are buying the office for them. You can also pick up a shopping plaza in this manner.
4) A DST can allow you 1031 into a grade A place while being absolutely hands off. You do end up paying a premium for them, but in the right place with right plan - you can name the percentage play into a deal....from $25,000 to 25 million. DST are broken down in various categories. Some of these investments are questionable - I was offered fractional ownership in a luxury hotel across the street from a large hospital in Detroit. Is Detroit a vacation destination?
5) You can also do the owner financing in a variety ways. MYOB mentioned wraps, and when rates go up - the stage for that strategy is set. By placing the properties into a trust, you are setting yourself up to do that easier.
6) You can automate your business by doing niches where you don't have to be hands on. Storage units for example have software systems that allow people to rent your units at 3 AM and pay for 6 months in advance - while you are sleeping. I was eyeing up a car wash last month but that actually requires work and I just didn't see the numbers that excite me.
7) A reverse 1031 is an option if you are finding it hard to find replacement properties that suit your needs
8) Finally you can train your replacement and do installment sales plan.
I do like MYOBs answer about making money. A Roth solo 401K is an awesome tool for squirreling money away tax free. Match your one half of your contribution using the money that you make on your schedule E, while claiming a small income from schedule C, property management business. After all if you manage your properties, shouldn't you get paid for doing so? --24.101.xxx.xxx
Exit Plan? (by tryan [MA]) Posted on: Sep 22, 2021 12:04 PM
I have nearly exited ... sort of.
Needed to get out of the hood .... just getting too dangerous to be renting in a sancuary city. Sooo...
Carried paper on a couple ... but they refi'd out of the higher rate in 6-7 years.
1031 exchanged to water front land in a resort area. Sold another to develop said land. Now run it as a vacation rental when we don't use it.
Paid cash for a small inn in said resort area.
Waiting out my last S8 tennie in the hood ... 22 years n'counting.
So I guess when it's in your blood ... it's what you do. --72.92.xxx.xxx
Exit Plan? (by Chris [CT]) Posted on: Sep 22, 2021 3:58 PM
I'd like to sell everything and pay the taxes. Then put the money with a wealth management group and live off 4-6 percent a year.
No tenant BS
I can live where I want
Easy to pass on
I see so many landlords that stay at the party to long and let there properties fall into disrepair as they age. Unless your kids want to run a landlord rental business why leave them one? All they are going to do is fire sale everything before your even in the ground. --24.45.xxx.xxx
Exit Plan? (by MikeA [TX]) Posted on: Sep 22, 2021 8:08 PM
I am just starting my exit plan. One of my son's is going to start buying me out as units come vacant. I'll be carrying the notes which will spread out the tax over time. Should work well for both of us, he doesn't have to deal with financing challenges, I spread out the tax burden and have a monthly income for a couple of decades. --209.16.xx.xxx
Exit Plan? (by Ed [CA]) Posted on: Sep 22, 2021 10:26 PM
Exit Plan? (by LisaFL [FL]) Posted on: Sep 22, 2021 11:02 PM
That was my plan too until I recently found out the IRS does not allow you to sell to a relative on an installment plan! Iím furious about it.
Well, you actually can do the financing but you canít spread out the taxes when the financing is made to a direct relative. You must pay the taxes in the year of the sale.
Iíve done a lot of checking to prove this wrong but it seems to be true. --75.89.xxx.xxx
Exit Plan? (by Lucy [IN]) Posted on: Sep 22, 2021 11:40 PM
Following also. Some seems to complex..don't even understand what some of that is. Will have to do some research. Kids..too far or no interest. I would like to invest in farm ground has been my thought. Farmers make good tenants and no repairs. --64.184.xx.xx
Exit Plan? (by Bonanza [NC]) Posted on: Sep 23, 2021 6:46 AM
Lisa and Mike - If you sell your property to an LLC which is owned by your kid and their spouse (or several kids) does that give a different result? LLC should be a separate entity in the eyes of the law and the LLC would generate a 1065 and K-1s. No sure why there would be a special law requiring you to pay all the taxes at the sale if you are financing. Just asking. --65.188.xxx.xxx
Exit Plan? (by LisaFL [FL]) Posted on: Sep 23, 2021 3:48 PM
From what I understand that is not permitted either because the LLC is owned by the related party. Iíve looked for a way around it but there doesnít seem to be a viable alternative except to sell it and pay the taxes in the year of the sale.
I donít get it. What does it matter if itís sold on installment to a related or unrelated party? Why wouldnít the income be taxed when it was actually received? How is this considered tax avoidance? There are no answers, but those seem to be the rules. --75.89.xxx.xxx
Exit Plan? (by Pmh [TX]) Posted on: Sep 23, 2021 5:55 PM
my plan is my kids start giving me $ now and I will leave them the properties in my will.. --72.176.xxx.xxx
Exit Plan? (by tryan [MA]) Posted on: Sep 23, 2021 7:54 PM
...sounds like we a thread:
BANDIT SIGNS THAT LANDED INHERITED PROPERTY
Exit Plan? (by Tonia [RI]) Posted on: Sep 25, 2021 3:50 PM
I am with Chris on this one and my strategy is in place. One property is under agreement, my second property to be listed soon. I can't wait --174.211.xxx.xxx
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