Investor Profile: The Inheritor
A single mom in her mid 50’s with a 16-year-old daughter inherited her childhood home in Menlo Park. The property was producing $5,300 per month in rent for her. She currently lives in a 1 bedroom apartment in San Francisco and pays $3,500 per month in rent. The family home was put on the market in September and sold for $2.5 MM.
A large percentage of her net worth was tied up in the family home. She had a $2,000 per-month negative cash flow problem and high debt. There was also a possible large capital gains tax of $600,000 if she sold the property outright.
We used a 1031 Exchange and purchased a personal home for the client in San Rafael for $875,000, and a 5 unit investment property in Portland, Oregon for $850,000. She took out around $600,000 from her Exchange for liquidity and to pay down debt.
She will rent out the San Rafael home for 2 years which will help defer taxes. She will then move into the San Rafael home in 2 years to reduce her monthly housing costs in the future.