Just In The Nick Of TimeSep 27, 2021
Just In The Nick Of Time
As much as we would like to force things sometimes, the universe has other plans!
Back in June I posted “So Long Villa Bella Mermaid” on my blog, about the sale of our very first vacation rental, down in Cape Coral, FL and its sale. I was so bittersweet because we did love that place, but for a variety of reasons we decided to cash in on the CRAZY market and sell it, as a turn-key vacation rental.
That purchase was literally the scariest investment that Jeremy and I had ever made. We were so unknowledgeable, and it was so far away. It was also the first time we had a decent chunk saved up for a 20% down payment!? That in itself was so gratifying because everything we had purchased up until that point had been creatively financed, whether it be using equity in our property or having the seller hold the down payment/mortgage (I teach you how to do this in my book “Vacation Rentals: The Ultimate Guide”). What made it scarier was that we were going to be relying on other people’s advice, management, and our faith that it would all work out. It had a huge mortgage payment, and the taxes were crazy, but we pushed forward and got one heck of an education anyhow!
After COVID as the world started to open back up, the FL real estate prices skyrocketed!!! I reached out to the agent that we had used to purchase the house to see what he thought it would be worth and if it would be worthwhile to sell. Boy, was I surprised when we could list it for over $150,000 more than we had paid for it 3 years prior! I was even more surprised when we got 3 offers on it within 24 hours of listing it…all $30,000-50,000 over asking price!? So that was it, we accepted one and decided to end that Chapter and start a new one.
Our original thought was to do a 1031 exchange and try to buy a chunk of land to hang on to. With a 1031 exchange, all your proceeds from your sale get held by a third-party intermediary until you close on a property, or if one isn’t found, you get your proceeds back but then must pay capital gains tax on the gain from the sale. People do 1031 exchanges because then you can offset your capital gains of that sale and kick the can down the road to another property, sometimes even decades down the road. This is a HUGE opportunity that most people don’t know about and one that I would like to do some trainings on in the future.
With a 1031, you have 45 days from the day of closing to identify a “like-kind” property and then a 180 days to close on it. If you haven’t found one within the 45 days, then you pay your small fee for that company to hold your money and then must pay Uncle Sam on the capital gains of the sale.
Our original plan didn’t work out with making an offer on the land that we wanted to purchase, so we decided to just be practical and take the proceeds, pay Uncle Sam, and then with the rest pay some things off – like, maybe fix up our barn and whatever other projects we wanted to start or add to. I called the 1031 company at that point and told her that we wanted to take our money out and not do the 1031 exchange. She explained that legally, we still must leave the money in the account at her company until the 45 days was up, and that they do this in case a property happens to pop up, because once it’s done you cannot do a 1031. So, we did…
Wouldn’t you know it, that just a few short days before the clock ran out, one of our neighboring properties with a house and 10 acres hit the market!?!? I literally sat down at my computer at the office, at the end of an overwhelming day, opened my computer, logged into our MLS system and there it was! I recognized it immediately and literally said out loud – “Oh crap, I think I have to buy a property!” One of my agents was sitting nearby and giggled and probably thought I was a crazy person, haha.
I immediately called the listing agent and before she even said hello, she said “I knew I would be hearing from you!” I was scrambling to get the words out, because I know in this market that places are literally going under contract within minutes of listing. I asked if anyone else had called or made an offer etc. She said that she had just clicked “Submit” to go live minutes before I called and that she had told her Broker that I would probably be calling – No sooner she said that to her Broker, I did!
Jeremy was working in a bad cell area, so I hoped that my call would go through. I called him and said, “I think we have to buy a property and do a 1031 after all!” He laughed at me, laid back as he usually is and said, “Oh boy!” I quickly explained which one and he said, “Do it!” Boy have times changed in our world…I rarely get a NO anymore…with buying property that is ;)
We made the offer, got it together and identified it just in the “Nick of Time” before our 45-day window had ended. We were able to use just enough for the escrow, down payment and closing costs and have the rest sent to us to do with it as we please. We will still have to pay some capital gains, but not nearly as much as we would have it, we hadn’t purchased a property directly.
It’s funny how the universe (God or however you identify with it) seems to always be conspiring behind the scenes, when we so badly want to rush and force things. I am a total control freak because of the constant busyness and life’s chaos, but some things must happen on their own – you just must lean in and have faith. I will say it again and again – There is no “right time”, you must set the goal, put in the work and be consistent! There also is no such thing as a get rich quick scheme. It all takes time and if you are like me, you struggle with staying patient, but it is always worth it!
I hope that this inspires you to take chances, invest in real estate and get onto that road of abundance. If you haven’t purchased my course yet, click here to do so! I will personally teach you every step of the way from start to operations. I was scared too with our first one and almost didn’t follow through, but if we hadn’t we wouldn’t be able to make all of those memories with our family, have that additional income, tax write offs, a free place to stay and then eventual proceeds ($$$) from the sale of it to roll into having even more financial freedom and more income.
We have a long road of renovations, planning, furnishing etc, ahead and I want to share the journey of it from start to finish with you all. I will be sharing updated info and incite here on my blog, and on Instagram (@christinavandergrift) and FB (@MsChristinaVanDergrift) with the play by play.
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