Under Contract

We are now under contract to buy this cute little townhome on Academy Ridge Road!

This is House #11, you can see more photos in my Day 13 post.

There was one other offer that came in right after ours, but this time we won the bid. I think part of what helped was we offered immediately after it went on the market (John hadn’t even had time to see it first), so were able to get under contract before the weekend. Plus, it being the Friday of a holiday weekend probably helped too.

One of the things I love about this house is it’s somewhere John and I would be happy living ourselves. I like being able to offer for rent a place that I feel good about. And it feels like a little bit of a safety net, if we did ever had to downsize, or move back into town for health reasons or something.

Inspections will be this coming week, with a hopeful closing date of only 2 weeks from yesterday.

The only question now is what to do with the remainder in the 2031 exchange. We tried to spend it out, but we didn’t want to over spend it. And we didn’t find a property we liked worth exactly the right amount, so we ended up under spending it. Our options are to take the remainder in cash and pay 35% tax on it, or to try and buy a little bit of land for cheap. A third option would be to use the remainder as a down payment, and take a loan to buy yet another rental, but neither John nor I want to do that.

I believe in paying taxes, but 35% of a chunk of money is still a chunk of money. I had originally been thinking something like 15%, which is the capital gains rate. But turns out, all gain up to the accumulated depreciation taken on the property is taxed at the Sec. 1250 rate of 25%. Then add to that the state tax, which in New Mexico would only be 2.5%, but since the property was sold in California, we have to pay the California rate of 10%. For a total of 35% tax.

On the other hand, what would we do with a little plot of low-end land? Land doesn’t generate cash flow, and there’s almost no appreciation in New Mexico, and it’s very difficult to sell land here. So we’d just have a piece of land.

I sure wish I could simply use 1031 funds for remodeling, because I could always find remodel projects, LOL!

Speaking of…the new windows have arrived at the Homesteads house, and they are just starting to cut the old ones out.