Project Description
1031 Exchange | Case Study | Menlo Park, CA
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.
The Problem
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.
The Solution
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.
Investors Goals
Increase Income
Pay Down Debt
Buy A Home
Defer Taxes
Triggering Event
Inherited Property
Equity In-Balance
Property Underperforming
Cash Need
Transaction | Details
Property Sold | Exchanged
Menlo Park, CA
Original childhood home in Menlo Park.
- Number of Units: 1
- Property Type: SFR
- Yearly Income: $63,600
- CAP Rate: N/A
- Sales Price: $2,500,000
Replacement Property 1
San Rafael, CA
The client will rent out this San Rafael property for 2 years which will help defer taxes and generate income. She will then move into the property after 2 years to reduce her monthly housing costs due to the property being paid off.
- Number of Units: 1
- Property Type: SFR
- Yearly Income: $52,800
- CAP Rate: N/A
- Purchase Price: $875,000
Replacement Property 2
Portland, OR
This Multifamily property will be the clients main asset (investment) moving forward. It will provide the income she needs currently and in the future.
- Number of Units: 5
- Property Type: Multi-Family
- Yearly Income: $60,000
- CAP Rate: N/A
- Purchase Price: $850,000
1031 Exchange | Results
+ 1
Properties
$112,800
Annual Income
$450,000
Taxes Deferred
4 Years
Break Even Point
Case Studies
Menlo Park, CA
1031 Exchange | Case Study | Menlo Park, CA 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 [...]
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