[USER]

Rental question. We have an LLC with 3 rentals in it.
We have our primary home we paid 160k for 10 yrs ago.
Looking to buy a bigger place.

We can do so without the equity of the current primary so looking at all options. Currently owe 100k on it at a 3.25 or so rate.

If we sell the current home within 3 years of moving out, it’ll sell for 450k or so, no capital gains.

If we sell after 3 years we’d lose the exemption and have approx 290k in capital gains, right?

We are considering keeping it to rent out. But if we do, and choose to sell after 3 yrs it’ll be big hit.

So, if we choose to continue renting it can I personally sell the house to my LLC at a few months under the 3yr mark of moving out for fair market value, and in doing so I won’t pay capital gains personally and the LLC will get a stepped up basis of 450k and I can depreciate that over 27.5 years like the other rentals?

And, assuming I sell it a few years after that for 500k the capital gains would only be 50k plus whatever deprecation recapture?

I’m might have the dollars off by some percentages etc but my scenario should explain what I’m after and what the benefits of doing so are.

I have a call into my CPA on it, but I’m too anxious to not ask what the herd says.

Thank you.

[Rob]

I have 3 rentals in nice areas and plan to live in each one for 2 years each to avoid the capital gains.

Could be an option for you to rent it out for a long time and move back in before selling.

[Josh]

I retired with RE.
Sell it and sell it now.
I’m not a cpa. But real estate in LLC’s are a disregarded entity. I dot.

Think there a step up in basis due to the disregarded entity.

Ie doesn’t change hands.

If you sell after 3 years renting. Yes, you pay capital gains.
You can do a 1031 exchange after it’s been a rental and DEFER the tax.

But better to sell it because then tax is EXCLUDED. Ie you never pay any tax.

And at $450k generally it’s not going to be a good rental. Considering 1% rule; 10% for vacancy 10% repairs, 10% maintenance.

I doubt there little cashflow. And the $290k could buy over $1 mil of rentals with 10% down. So, a lot more cashflow, appreciation, debt pay down, depreciation.

Always always always try and scale. Atleast in my opinion.

[Author]

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