Yet Another 1031 Question - And Mort. Question
This one has more to do with moving out of state, and how banks look at you as you go through the exchange.
We are moving as soon as is feasably possible. We are unsure whether it is better to put the rentals on the market first for the 1031, and wonder how the banks in GA will look at us, in the exchange, seeing as we don't live there yet, and neither of us has a job there yet (my husband is a special ed teacher, he's in high demand and could easily get a job there).
Or is it better to move ourselves there first, have the jobs, and then concentrate on the 1031s?
Do the mort. co's even look at you that hard, seeing as you had good income-producing rental property in FL and the properties you are wanting to purchase in GA are equally as productive (the proven track record thing)
I would rather do everything at once, just to get it over with.
Thoughts? Advice?
Thanks. 
Hmm, get jobs or put real estate property on the market?
You are getting ahead of yourself. You don't need financing for your 1031 exchange replacement property until some time after your relinquished property has sold.
If you are putting the relinquished property on the market when you move to GA, why not secure employment while your property is listed for sale? After the relinquished property sells, you have 180 days to acquire your replacement property. Surely, this is enough time to secure an employment contract which you can use as evidence of your income.
I am self-unemployed, and I just did a stated income, stated asset loan for an exchange replacement property. It helped that I was only looking to finance 55% of the replacement property with the balance coming from exchange funds.
Thanks. Feeling a little overwhelmed ATM.
I'm one of those people that likes to plan for every contingency, every situation, so I am ready for it. Not always good at "playing by ear" as things happen.
My husband is a teacher, we know he can easily find work but he will want to finish the school year (May). It could take that long or longer for the houses to sell. Me I'm self employed.
A lot of homes around here are not on the market for even a month before they are sold. Hence the concern.
I suppose this is one of those things that has to be done, as it happens. Can't plan for everything.
Quote:
On 2005-01-01 22:55, NewKidinTown2 wrote:
Hmm, get jobs or put real estate property on the market?
You are getting ahead of yourself. You don't need financing for your 1031 exchange replacement property until some time after your relinquished property has sold.
If you are putting the relinquished property on the market when you move to GA, why not secure employment while your property is listed for sale? After the relinquished property sells, you have 180 days to acquire your replacement property. Surely, this is enough time to secure an employment contract which you can use as evidence of your income.
I am self-unemployed, and I just did a stated income, stated asset loan for an exchange replacement property. It helped that I was only looking to finance 55% of the replacement property with the balance coming from exchange funds.
Lenders all approach these issues differently. I would speak to the lender you will be working with and see what their requirements are.
One item to note. GA is one of three states that does not completely follow the 1031 exchange code. You can exchange into GA with no problem, but if you should ever decide to sell GA rental property and buy outside of GA you can defer your federal capital gaines by not GA capital gains. The only way to defer state capital gaines in GA is to by replacement property in GA.
[addsig]
Thanks, Bill. We took that into consideration and decided we still want to go to GA, GA law may or may not change if and when we ever decide to move the properties out of there. What are the other two states that don't completely follow 1031?
An update: we're just putting them all up at the same time. Will deal with hurdles as they arise. Wish us luck, I'm sweating bullets!
You can only have one primary residence at a time. Even if you use two houses, one is your primary and the other is a second home. Only the primary qualifies for the capital gains exclusion.
It would appear that property #1 does qualify based upon your use as your primary residence from 2000 to Apr 2004. Sell anytime between now and Apr 2006 and the capital gains exclusion will apply at least to a part of your profit if not all. Renting rooms may make your house a mixed use property, with capital gains taxes applied to the "rental" portion. Consult a licensed tax professional in your area to clarify your tax treatment.
Property #2 must be BOTH owned and occupied as your primary residence at least two years before you become eligible for the capital gains exclusion. Since you only purchased this property in April 04, the earliest you become eligible for the full capital gains exclusion is April 06. Selling sooner will be a taxable event.
You can only use the capital gains exclusion on one property at a time, and only once within a 24 month period. Sell two primary residence within a 24 month period and only one gets the capital gains exclusion, the other sale is a taxable event.
A primary residence does not qualify to participate in a 1031 exchange. If you are presently using property #1 as a rental, then it probably qualifies for 1031 exchange treatment, but this only defers taxes. The primary residence sale rules exempts you from taxes.
Sell property #1 now and take the exemption..
Sell property # 2 in 2007 and take the exemption again.
Thank you both.
Looks like general consensus is to take advantage of the tax free exemption whenever possible. Got it.