As anyone who has read my posts knows I am a newbie mom and pop operation.

I have a few places that I have reached 20 years in holding.

Ray-N-Pa has mentioned a few times lately about selling a place he has because he has owned it for 24 years.

It got me wondering if this was for taxes via depreciation or if it is just because the place is old. My newest purchase is older than maybe half of my holdings so I do not think that is it.

Does holding after the depreciation falls off make sense?

I know this should probably be Rentals 101, but depreciation schedules were one of the main reasons I never did my taxes after the first purchase.

There's a long list of potential reasons to sell.

You will know yours when ya get there.

Or you can continue to come here and complain

until death do you part.

We are never selling - at least, that's the plan. Our properties provide us with our living income for retirement and DH prefers having a job to drifting.

Like GKarl, I don't let taxes dictate, it's a financial decision. If it's a golden goose it's never a good idea to butcher it.

Every year I sell and buy places. I do this via 1031's . This forces me to dollar cost average my purchases and my sales.

There are times to push harder on the commercial replacements and there are other times to push hard on residential replacements. It sure is harder to get residential replacements, so I shift so of them to another type of real estate. This reduces the risk that occurs from a market correction.

In the residential world you hear location, location, location........and where location is a concern in the commercial world - I focus on operator, operator and operator instead.

I bought a whole slew of properties in Pa when this area suffered the Y2K set back. I sold a bunch of them out in Southern California back in 2004-2006 time frame. So how do you know when to sell. Look at each place you have. This is your baby. If after taking a place out of phase maintenance, I ask myself, what can I do with this place over the next 5 or 10 years to improve it. If the answer isn't that clear, then maybe it is time to sell the place and pickup a replacement. If I sell a house, I typically try not to pick up the same asset class.

So all thongs considered, if you have a property that gives you depreciation and a second one where it doesn't, if all other things are equal, which one would you chase? I know there are plenty of folks out there that are chasing this market. I feel that is wrong approach. Around here if a place is move in ready, there will be multiple offers on the place. So don't go after them. I love my estate properties and my burned out landlord properties. These offer a value add opportunity still.

How do you avoid getting burned out? Turn over a property before burn out settles in.

My current 1031 exchange? I bought the place initially from the county as a condemned house with a four car garage. The place has three lots walking distance to the largest man made lake in the state. I bought them for $10,000. The house got torn down, a new metal roof on the garage and new electrical service......I am in the place for less than $30,000. I listed the place for sale with the broker I use and bam, I didn't get the $79,900 sales price, but I did get $72,500 in a few days. So the replacement for that house will probably be a 1949 Sears FSBO. I did get some income from renting out the garage to a local marina that stores boats during the snow months up here and that is about five months. So $1,500 for the year isn't a home run in the form of rent, but I did this to clean up the neighborhood that I invest in.

I was not talking about getting burned out. I went thru that phase already some time back.

I was merely asking if the depreciation on a residential property makes that much of a difference yearly in holding it. Again, I am not keen on the nuances of depreciation for a property. I know the time frame. I know more about depreciating capital expenses for the property.

If you sell and don't do the 1031 exchange you are going to pay taxes on capital gain AND recapture of any depreciation you claimed. OUCH

What is your plan?

So after the depreciation time limit runs out it doesn't affect the bottom line as much as I was thinking?

How much is your annual depreciation on this property?

Ray said "So all thongs considered,"

snicker snicker

must be a new tenant requirement

Some of our properties are depreciated out after 27.5 years. But they are still profitable... so we haven't yet sold any just to trade.

We MAY sell a few lower rent properties and put them together for one high rent property to simplify life as we get older. But we haven't done that yet.

I like to increase the quality of my units. I have the replacement property already under contract. I try to pick up places that are in need of work but are the newest 1/3 of all houses in the area. But if that goes astray there is always OGMs as an option to purchase.

zero,

When the depreciation tax shelter runs out, often the mortgage disappears at roughly the same time.

We have props we bought 47 years ago, deprec long gone but the home I was renting out for $150/mo back then now brings in $900/mo debt free! (cha-ching!)

I believe taxes should ALWAYS be part of our decision making. Like realtor commissions too many LLs just follow the sheep in front of them. There are MANY ways to save on taxes.

I am currently bundling a few low end and project homes to investors and 1031ing that sale in to one really nice executive home. Cash flow will be the same but much less work and not a penny lost to the govt.

Thanks all!

This is the info I was curious about. Not so much selling because of burn-out or just because the market is hot for selling.

I honestly do not know what the numbers are as far as depreciation on my places. Maybe I should know that. Right now I let my tax guy handle that so I can do what I am better at. Things like drinking coffee and asking silly questions.

It is easy to understand selling to move up in quality and that is something I need to look into more.

zero,

An update on deprec is a simple question for your accountant. I don't plan on ever selling, just 1031ing into better props.

Years ago when values were different my atty said her goal was to 1031 all homes into farmland - no toilets, trash, roofs...