The Ramsey Show - App - Is It a Bad Idea to Co-Own Property With My Mom? (Hour 2)

Episode Date: March 31, 2021

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Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, it's the Ramsey Show. Where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. Dr. John Deloney, Ramsey personality, is my co-host today. Open phones as we talk to you about your life and your money the phone number is 888-825-5225 888-825-5225 robert in brooklyn new york starts us off this hour hey robert how are you good afternoon dave dr john how are you guys? Great, man. How can we help? Great. Great. About a year ago, my father passed away. He was my business partner. We have a general contracting company and a very, you know, and obviously my best friend as well. And we had two properties that

we invested in recently that now I'm half partners with my mother by default, and I wanted to see what your guys' opinion on what I should do with them. I'm sorry for your loss. Thank you. I appreciate it. You and your dad work together every day, and so you could fight things out, you could talk things out for the business or for the investments or anything else. If you had a renter problem, you just talk it through. How's it going with your mom?

Essentially, I'm doing everything, which is fine. She had no involvement with the business, so I just, since he passed away, I've been doing everything. Do you want to still be in business? Dr. John, that's a conversation for a different time, but that's where I'm at right now. I mean, I do, I do enjoy being a general contractor as it's ups and downs, but it's Are you asking about the houses, what to do with them, or what are we trying to get to here? Yes, the properties. I'm trying to figure out what I should do with them.

Okay. All right. Well, there's nothing wrong with you managing them and owning half with your mom, as long as there's not some kind of toxic stuff going on. It's not putting a strain on anybody. There's also nothing wrong with you selling both of them and splitting up the money. Give her some money, and you take some money and you can even help her get with an investment broker and do some investing um you know so she's got some of that money coming in what would she like to do uh she she's left it in my hands. She is on board either way.

My father and mother, they had a great marriage, but I never realized how little she was involved in the finances. So since his passing, I've basically had to give her a crash course on how everything gets paid for. The two properties, I would say we invested about, I would say, $600,000 to $700,000. They make about 90 gross a year, and they're worth about $2 million if you sell them. That loops me back to my question, do you want to keep doing this? Because if your mom's indifferent and the finances here, if you sold these properties and walked away with a hefty return on this, it sounds like the real question for you is do you want to still keep being in this business? You're in it with your mom financially, but she's not trying to jump in and manage it.

And I think we should do the lawn this way. And I want to use this roofer. So really it comes down to do you want to do this or not there's nothing wrong with either answer no in terms of the financial or business aspects of it since there's no toxicity um it's i i let me ask you something i think i'm hearing a little bit of resentment for her being what we call in the south a kept woman uh she was so taken care of and so in the dark and she's just like you keep doing all the work like your daddy did and just send me the money yeah it's i mean not exactly in that sentiment but yes she's concerned

about me having to take on the burden of supporting her because i gave her my father's paycheck for the past year and everything to kind of get everything settled but i'm at the point where if i continue the business i need to free up that capital to hire people to help me yeah you know a very big spot the business is a separate equation from the real estate is it not yes but they're it's there to me they're intertwined because if i sell it i could reinvest in my own business. So, Robert, you still have avoided my question. What do you want to do? Dr. John, what do I want to do?

What do you want to do with the real estate? What do I do with the real estate? And then what do you want to do with the business? The business I want to keep, the real estate I want to sell. Sell it. Done. Sell it. Split the money with her. Help her do some investing. Help her go through. I'll to sell. Sell it. Done. Sell it. Split the money with her.

Help her do some investing. Help her go through. I'll give you Ramsey Plus. Let's put her through a money course so she learns how to be a person who handles her own funds. Okay? We'll teach her how to handle money, and I'll pay for it. Sure. I'll take care of widows here.

That's what we Christians do. And so we'll do that. We'll take care of her in that regard, not by taking care of her, but by showing her how to take care of herself, teaching her to fish rather than giving her fish. And then she's going to have a million dollars, and then you're going to use some of this money to buy her out of your business, aren't you? No, no, she has nothing in the business.

It's not to buy her out. Okay, so she doesn't have any ownership of the business from the estate? No, sir. Okay. Okay, so she doesn't have any ownership of the business from the estate? No, sir. Okay. No, sir. Okay, cool. Sell the real estate, split the money, help her get set up and get running, and you use the money on your side to run your business.

Is that okay? Sure. Yeah. Yes. Does that make you smile? It did. Yeah, it did. Okay, is your dad in heaven smiling?

I hope so. Yeah, I think he is. Is your dad in heaven smiling? I hope so. Yeah, I think he is. I think I'm doing a good job. You took care of your mom, and you're running your business, and you're a grown man. You're going to hand your mom a million dollars, Robert. You did a good job. You sat down and taught your mom how to take care of herself. You gave her a gift of freedom.

You're a good son, man. You are. You're a good man. Listen, a scumburger wouldn't be wrestling with these things. No, they would have sold the house and given mom $50,000 and said, look at all this money. And hey, those are the kind of sons that call my show sometimes, Dave. They are out there, Robert, and it's not you. Yeah, you're a good man. So hold on. I'll have Kelly pick up and we'll get your mom signed up for a year in Ramsey Plus.

She can go through Financial Peace University. She can learn how to do a budget on every dollar. There'll be coaches in there to help her. You can walk with her through the whole process to ensure that she's learning the lessons. There's accountability with groups and coordinators in there. Ramsey Plus is the full package for you to do the whole thing, and it's going to be free to her. Okay? So you hold on.

Kelly will pick up, and we'll get that going. And there's nothing wrong with starting Ramsey Plus with a million dollars head start, right? There's nothing wrong with that at all. Sitting down with a SmartVestor Pro and getting that money invested. What's the best way we can do this? That's right.

So if you listen to this show, one of the reasons people listen to the show is entertainment, because humans are just freaking entertaining. But the other thing, my challenge to you guys listening is to do what I've done for 30 years doing the show, and that is, what is your takeaway from some of these things? So here's your takeaway, 45-year-old couple. Both of you need to know how to handle money. Because one of you is not going to be here someday. That's right. You are not empowered. You are not equipped.

You cannot just say, it's a famous Southern saying, whatever you want to do, honey. No! Because one day honey won't be there. You've got to learn how to do this. It is unfair to everyone in the picture for you to intentionally not know how to do this stuff and someone else take care of you. You're a grown-up. Bussing at mama.

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You can do them online with the Ramsey Smart Tax software for just a few dollars. Or if they're looking a little complicated, we'll connect you with a pro that you can feel good about. Text the word TAX to 33789. Text TAX to 33789. Text TAX to 33789. Dr. John Deloney, Ramsey Personality, is my co-host today. Allison is in Cincinnati. Hi, Allison. Welcome to the Dave Ramsey Show.

Hi, Dave and John. How are you guys? Better than I deserve. How can we help? Great. Well, thank you for taking my call. My husband and I have been avid listeners since 2007, and we paid off all our debt back in 2012.

Wow. Yeah, so by listening to you guys all those years, my husband was actually able to start a business in 2016, and he does remodeling and some landscaping. Primarily his work, though, is remodeling. He does have a great customer base. But the problem we are running into is he's a one-man show. And he's bombarded with work and so much that he can't keep up.

So it's a good problem to have. But now I think it's at the point where we need to, you know, hire some people. And so I have some reservations, though, regarding hiring people, though, because, you know, I don't like the payroll withholdings, finding trustworthy people that do quality work. And then, of course, being able to pay them. We're still trying to perfect the bidding process, bidding jobs accordingly. So we've tossed around the idea of actually like 1099 people. trying to perfect the bidding process, bidding jobs accordingly. So we've tossed around the idea of actually like 1099 people. That way they would handle their own taxes and that kind of thing.

But, you know, we're really stuck on what to do. And I hear you talk about your contractor friend all the time and how much money he actually makes just being a handyman. So I'm just calling to get some guidance and to find what would be the best way to approach this problem. Well, you guys are incredible. Well done. Well thought out. You've accurately identified some of the mines in the minefield that you have to walk around to have the opportunity to grow the business. But all of the things are, none of those are insurmountable.

They can all be handled. But it's like anything you do the first time, it's scary, and you'll be better at it the second time than you were the first time. So you want to learn enough about that you don't do harm to yourself or someone else, but also cut yourself some slack because I've been hiring people to work on our team now for over 25 years, and I'm just now getting good at it. I don't do it anymore. But, I mean, you see what I'm saying.

The first time I hired somebody, I was stupid. I was dumb. I thought if you just hired somebody, they would work. Allison, even I got in the building, man. He's not that great at it. So here's the upside and the reason you do need to do this. You need to face your fears and walk through this. Because right now your husband is a wonderful contractor.

He's a hardworking guy. He owns his job. He doesn't yet own a business when you're a one-man band and you're sick zero money comes in when you go on vacation zero money comes in because there's no one else doing the work carrying the water but you and so you own your job and so it is going to stabilize your life to have at least a little bit of growth to go to the one to five employee range is going to change your life in good ways uh a you'll be able to make more money b you'll be able to get more work done help more people see when you're on vacation they're all still working if you hired well and led them well okay so it stabilizes your life and increases your income if you do this properly

but it is a challenge to get good people and it is a challenge to keep good people and uh doing the paperwork for the stinking payrolls of paying the butt um but you can have a little company do that for you or get in touch with one of our tax ELPs. A lot of those have bookkeeping services, and they can run your payroll for you. There's other places you can outsource. It's a little difficult to outsource one or two people on a payroll

to a payroll company, but you can do it. It's just, you know, it's not that hard to do it yourself, but I wouldn't recommend doing it. I'd recommend you have an accountant do it for you or a bookkeeper of some kind do it for you. As far as the hiring process goes, your husband has to add some skills to his tool belt, no pun intended. He currently is a great contractor. He's good with customers. He's good with getting the actual work done.

He's handy, all of those things. Now he has to start to learn how to lead and hire and fire and confront bad behavior and those kinds of things. And so that's a whole other skill set that's called leadership and called running a business. But it's a wonderful journey. I've been on that journey myself for 25 years. I am getting better at it, all joking aside. But I haven't arrived. business and uh but it's a wonderful journey i've been on that journey myself for 25 years i am getting better at it all joking aside but i haven't arrived i still am learning things every day i still make mistakes every day as a leader but uh but you you get a lot better at it and you

build your competence and your confidence just like he does swinging a hammer the same thing right and as far as the money part goes as far as the money part goes, you hire people that can make you more than they cost you. You cannot do the 1099 idea. It's not proper to say it this way, but it's against the law. It doesn't work. Okay. The law says that if someone acts like an employee, walks like an employee, talks like an employee, they're an employee even if you declare them to be 1099.

1099 is an independent subcontractor. They run their own business. They don't work exclusively for you. You don't furnish them materials. You don't furnish them jobs, and you don't furnish them hammers and saws, and you're doing all of that. What you have is not 1099. You have an employee, and if you get audited with a 1099 on there and it's supposed to have been an employee,

you're going to get penalized. Okay. That's good to know. What would you think would be a, like, what's the, I guess, formula? How much should you have in reserves to be at the point where, you know, you know you have enough? How much do you have in reserve? We have probably like $25,000 right now in reserve. You're fine.

Okay. You're fine for two hires because you're going to hire people that are going to make what kind of money? I don't know. We haven't really discussed the cost of the pay yet. They're not going to make $160,000. They're going to make $30,000, right? Or $40,000. Right.

I mean, it's something like that. So, you know, you've got enough to cover easily three months of them producing absolutely no income. And they're only a cost. And so you could start talking about putting the first two on but lay out your game plan to go okay i'm going to be able to get this much more income in as if i'm going to spend three thousand dollars a month on this guy i'm going to make six thousand dollars a month on this guy so he's not only free he puts money in my pocket you have to have you have to make more on them than they cost you,

or your formula for hiring people makes you go broke. Okay. So then when he bids, he should bid for two guys versus one guy. Bids. When he bids a job. No, he needs to bid the job. If it takes two guys to do the job you do that but i'm just saying in other words your husband's doing job a right now job b he can't do the new hire is going to

go to job b so you're going to get the profits from job b over and above what you paid the new guy okay and so you paid the new guy out of job b, the extra work, and you're going to make a profit on job B that you wouldn't have gotten because you couldn't have done it because your husband's on job A. Right. Just dividing and conquering based on doing double the work. Yeah. You've got to increase the work level, increase the revenues as a result of having more workers. That's what I mean by they're paying for themselves.

And it's recognizing it's a different job than the trade. You've got to be as good as a leader and a hire and a fire and a bookkeeper. You've got to put that much effort as you did to learn how to work that circular saw, right? Yeah, both of you do. Yeah. And this is where people going from to their first team members really, really struggle. You really have to start studying leadership. It's a craft.

Hold on. I'm going to send you a copy of our book, Entree Leadership, and get you started. in the lobby of ramsey solutions on the debt free stage krista is with us hi krista how are you good how are you dave better than i deserve where do you live uh near toledo ohio near where do you live uh genoa ohio okay all right because i went to ice hockey camp in Bowling Green when I was a kid, just south of Toledo there. Yep. Close by. Right in your area. Cool.

So how much debt have you paid off? $90,858.02. Love it. How long did this take? 23 months. Good for you. And your range of income during that time? $62,000 to $75,000.

Cool. What do you do for a living? I teach agriculture to 7th through 12th grade students. Oh, wow. Good for you. Thank you. so what kind of debt was the ninety one thousand uh eighty thousand dollars was student loans from ohio state university and my master's degree at capell university out of minnesota and then about ten thousand dollar car loan okay wow so how long have you been out of school? Oh, gosh. Graduated in 2012.

Eight years. Okay. Yeah. Nine years. Whatever. Yeah. And getting ready to be nine. And the $80,000 is just hanging out, huh?

Yeah. Yeah. Well, I decided to go back to get my master's degree. So I've now had that for about two and a half years. Yeah. But the rest of it's just been hanging out. Sally Mae had her own bedroom. So what happened 23 months ago lit you up uh well actually uh my brother and my parents have been through um financial peace university uh-oh and

they um actually my brother for christmas got me the book in 2017 i waited till a year later to find my first class um because like most people you're not sure um to believe it or not um so i waited for a year later your brother joined a cult yeah so found a class and then i actually in 2019 went through that and then um in 2020 i went through the a second class just to keep me fresh and understanding what i'm doing as well yeah while you were on the journey. Yeah, it's a good encouragement to loop back through or to coordinate a class. Sometimes people do that. Yeah.

Well done. Okay, so what happened when you went in there that made you say, I can do this? Just me going after goals and just wanting to pay off that debt because I don't want to have debt. I want to be able to go and live and go on vacations. Get Sally Mae out of the house. Absolutely. How does it feel? It feels great.

Was it worth the sacrifice? It sure was. And I still continue to sacrifice things, but you still can save money in different ways and still not have debt. What was your biggest, hardest sacrifice during that 23 months? Telling people, no, that I can't go out to eat. I only have $85 a month for my budget. When the money's gone, it's gone. Yeah, yeah, okay.

Because that's a social experiment. Mm-hmm. Yeah. Good for you. Did you have a group of people that hung with you and said, all right, we'll all come over then? I mean my parents. We just all hung out. So you got a lot of family support all the way through.

That's good. That's good. What was it like walking with middle and high school students while you're walking through this? Did they know you're doing this? So I did tell a lot of my students. They actually teach FPU at my high school. So they don't believe it. So I can't wait until I go back in my agriculture classes.

They're going to all see this. Very cool. You're a YouTube star now. Yeah, I love it. Well, congratulations. Thank you. We're very, very proud of you. So when you teach foundations for personal finance to high schoolers in a future class, which you may end up doing, I bet, what are you going to tell them the secret to getting out of debt is?

Staying on a budget and being persistent. 23 months. 23 months changes everything. Yep, and I definitely went into my savings um i first did the ten thousand dollars and that was still there did the next ten thousand still was there then i did the next so i taken thirty thousand dollars out of my savings to put towards that wow and then punched it in the nose also over the 23 months yeah good for you that's scary to do it it was at first and the debt was still there yeah doesn't go away nope doesn't go away till you pay it i love it i'm so proud of

and it's cool for these students to see that you're not a theory you're not a good idea you're walking talking living proof of what happens when you work really hard for these kids that are going to go into agriculture, right, that plant seeds for today so that something will grow for tomorrow, you're a teacher that's walking the walk, and that multiplies your effect on those young people. You're changing a bunch of family trees with the sacrifices you made. Good for you.

Thank you. And I know it's hard. If your brother's worth his salt, he's going to rub your nose in this a little bit, so good for you. No, he came with her. Is he one of them out here? Yeah, raise your hand. And your brother's worth his salt, he's going to rub your nose in this a little bit. So good for you. No, he came with her. I know. Is he one of them out here? Yeah, Rachel is.

And Mom and Dad are here, too, right? So you've got the cheering squad here. That's great. I love it. And a little bit of I told you so, right? Why aren't you doing it sooner? I'm so proud of you. Well done.

Thank you. I know they are proud of you. Excellent job. We've got a copy of Rachel Cruz's latest New York Times bestseller, Know Yourself, Know Your Money. Thank you. And we'll come out and sign that and everything at the break here. So very proud of you. All right.

It's Krista from the Toledo, Ohio area. $91,000 paid off in 23 months, making $62,000 to $75,000. Count it down. Let's hear a debt-free scream. Three, two, one. I'm debt-free scream three two one i'm dead free i love it so fun so fun the number of people now i mean financial peace foundations and personal finance now taught in 48 percent of high schools in north america and the number of people now, I mean, Financial Peace Foundations and Personal Finance now taught in 48% of high schools in North America. And the number of people that have gone through Financial Peace University and Ramsey Plus now, got a Ramsey Plus membership, you know, get connected to EveryDollar, get on the budgeting app.

It enables you to do the stuff that these folks are doing that are doing these debt-free screams. And so, you know, you need the information and the inspiration to do one of the hardest things you're ever going to do in your life, but one of the most rewarding things you're ever going to do in your life, and that is get yourself positioned to become wealthy. You get positioned to do that, most likely, by being clear of debt. So a Ramsey Plus membership will do all of that for you. You plan out every dollar. You connect your budget to your bank.

You get custom budget reports. You get everything you need. There's a free trial for Ramsey Plus, a free trial at DaveRamsey.com. Just go to DaveRamsey.com and look for the free trial on Ramsey Plus. You get started on the whole thing. You'll see how it all works. We'll walk you through every bit of it and you'll have you know that's the almost every one of these people do their debt-free scrims have been through financial peace absolutely and they've they've

either taught it or they've they've talked about the accountability of the other folks in that group saying hey we're doing it too we're doing it too and everybody i know who has a budget has that month of those two months when they think man everybody who works out it's like i'm not doing everybody who fill in the blank and having a group of people with you get that information inspiration you get that community around you that just is that prodding or that holds your arms up in the desert man you gotta you gotta have some cheerleaders you can't just have people trying to drag you down that's you gotta have i mean there's lots of people tell you you can't win that's that's that's the culture we live in

yeah is they don't want you to win because it makes them look bad i call it the titanic syndrome when that movie came out it was everybody loved it until everybody loved it and then it became cool to talk about how dumb that movie was and it just to beat it up right it's cool to to look at somebody's going after something and then think why are you doing that that's stupid that's dumb man and getting a group of people behind you, whether you're going for a run, whether you're getting out of debt, whatever that is, that is everything, Dave. It's everything. They did that with disco, too.

Well, disco was terrible. No, it was cool. It was cool until some rocker decided it wasn't cool, and then it wasn't cool anymore. It's the same thing. It was a whole movement. You ought to watch the Bee Gees documentary. It's a great documentary. It's like they made

so stinking much money and then all of a sudden they went from being gods to being like a symbol of foolishness or something. You know? Same kind of thing. It was cool until it wasn't cool.

Speaking of symbols, I don't want to take away from how extraordinary that debt-free scream was, but you mentioned something I'd never heard before that I just need a little bit more clarity on. You went to hockey camp.

What is that? What in the world is ice hockey camp? So much stories. So many stories in so little time. Coming up on a commercial break. Oh, I see what you're doing here. James, cue the music. Quick, quick, quick.

Redneck Southern hockey players. Can you imagine what this was? Oh, it was a fight and a hockey game broke out. Okay. It's rare that my mind is blown, and Dave, I think you blew it. I played all the way up into college. I had no idea. You don't know these things.

I have antique ice skates sitting in my bookshelves in my study at home. They truly are antiques. No question. They're funny. It's great. It looks like something you got at a flea market. This is the Ramsey Show, Dr. John Deloney, Ramsey personality, number one best-selling author, is my co-host today.

We're glad you're here. Phone number is 888-825-5225. Joshua is with us. Joshua is in Fredericksburg, Virginia. How are you, Joshua? Hey, Dave. I'm doing great. How are you doing?

Better than I deserve. How can I help? So I just have a quick question. I'm relatively new to your show, but I've been watching a lot of clips, and I'm on my way. I'm on baby step number one, getting my money put away in savings. I want to ask a question about when I'm moving full force onto step two. I want to ask your advice on I have the opportunity to act as a private option

so I can flip a few cars a year, and I wanted to know if cars a year. Um, and I wanted to know, uh, if you agree with stuff like, you know, spend money to make money type side gigs where I can buy cars and flip them in the process of paying off debt to,

you know, help me get more profits overall and pay things off quicker. Are you doing that with cash? Yeah. Well, so instead of just putting it full force on the debt, I would put cash aside to buy cars on the cheap and then flip them. But when you buy the car, you're paying cash for the car?

Yes. That's what I mean. Okay. So give me an example. You would buy a car for how much and flip it for how much? So I could probably get a car for two grand and easily flip it for four to five um because like i said i have private i have access to a private auction so the cars are a lot cheaper than anyone you know a public auction or anywhere else okay and um and what do you make a year at your day job? About $33,000. I just started up a new job.

Okay. And how much debt do you have? So I have around $14,000 in debt. Okay, cool. Yes, I would do that. Now, let's think through some guidelines, because as you know, you can get sucked into this, and you can put all the money back in and all

this kind of stuff and then you then you ended up benefiting your debt payoff not at all but you sure did get into a bunch of cars okay so we don't want to do that so it's one at a time and you take you know you say i'm gonna okay i'm gonna put some seed money in or prime the pump, if you will. And so we're going to set $2,000 in. And then you buy that car and you flip it for $3,500. And you pull the $2,000 out to do the next deal, keeping it there. But anything above the $2,000 goes on the debt every single time. Everything above the $2,000 goes on the debt every single time. Everything above the $2,000 goes on to the debt.

Don't buy a $2,200 car or a $3,000 car the next time you're buying a $2,000 car every time or whatever your baseline is. But what can happen is emotionally you get more caught up in doing the deals than you do actually causing the deals to benefit you. And you go, well, you know, gosh, if I turned a $2,000 into $3,000, I could turn a $3,000 into $6,000. And then I could turn a $4,000 into $8,000. And then you get sucked into this vortex and all the money is pouring back into this system you're building rather than in getting out of debt. Does that make sense? Yeah, yeah, absolutely. I get you.

I didn't even think about that. Knowing me, I would fall into that for sure. Well, you're a player. That's how I know to warn you against that because I'm a player. It's the kind of thing I do. And so I have to watch against it. And car auction directors love players because they say, man, if you just go to five on this, you can flip this for 14-3 easy.

And it's just hard, hard. You have to be disciplined, right? Yeah, you really have to five on this, you can flip this for 14-3 easy. And it's just hard, hard. You have to be disciplined, right? Yeah, you really have to be disciplined. That's the purpose of an auction is to take advantage of undisciplined people. Or to pit disciplined people, undisciplined people against each other. Yeah, exactly. And then all of a sudden there's no room in the deal because you've overpaid. That's what you get into.

But, yeah, give yourself some real strict business operational guidelines, if you will, like I just laid out, something like I laid out, and then every time stick to them. Don't let the greed on one shoulder talk you into losing your common sense on the other shoulder. And if there's no $2,000 deals to be had this particular Saturday, go home. You walk away. Go home.

You walk away. That home. You walk away. That's exactly right. That is a good plan. Rob is with us in Tampa, Florida. Hey, Rob. Welcome to the Ramsey Show. Hey, Dave. How are you doing?

Thanks for taking my call. My pleasure. How can we help? So I have this out-of-state property that I want to get rid of. It's a rental property. And I don't know whether or not I would like your advice on either paying the capital gains or taking a 1031. I had my tax guy kind of look at it, and he estimated something about 75,000 in capital gains. So you got like a half-million-dollar gain?

Yeah, I think where I'm trying to sell this out-of-state property, it's going to be a $400,000 gain. So you've had it a while, and what's it sell for? I'm asking for upwards of over $800,000. Yeah, okay. And you've adjusted the basis down by depreciating it over the years you have a lower adjusted basis am i right i bought uh yeah i i bought it 10 years ago yeah and you've been depreciating it on your taxes yes sir yeah and every time you do that that

amount of depreciation comes off your basis and increases your gain you understand that right i do, yeah. Yeah, okay. All right, that's what I'm talking about, adjusted basis. All right, so a 1031 tax-deferred exchange will probably cost you $1,500 to $2,000 in legal fees to execute. You have to have an IRS-approved closing company to do it in. You can sell the property into an escrow account with one of those companies, and then you have so many days, I believe it's 60 days to identify and six months to close on the

other property. And that effectually creates a trade, and you've rolled all of your equity and your basis over to the other property. Someday, if you ever sell that property you're going to pay even more capital gains because you will have lowered the basis even more at that point so okay uh do you want rental property in your area uh if i can give you like a just a brief history so um i didn't expect to become an out-of-state landlord uh i always thought i was going to move back into that house but i'd like where i'm at Just a brief history. So I didn't expect to become an out-of-state landlord.

I always thought I was going to move back into that house, but I like where I'm at now. I wouldn't mind having rental property here, but that house was really my house that I wanted to live in. It's gone now. It's gone. So do you want this money to invest in mutual funds minus $75,000, or do you want to own rental property in your area? I think I wanted – I was wondering if I could move back into it after a 1031 exchange

and it'd be my house again. If you sell the house, you don't own it anymore. No, I know. So my question was – I'm sorry – whether or not to go ahead and just pay the capital gains tax, buy myself an own house, or kind of do a 1031. You can't do a 1031 to your personal residence. It has to be to another rental property. Okay.

So do you own a property in Tampa that you live in? No, I'm renting right now. Okay. So you want to use this money to buy property in Tampa that you live in? No, I'm renting right now. Okay, so you want to use this money to buy a house with to live in? Yes. Okay, you cannot do that with a 1031. 1031 is a like-kind exchange, and it requires you go from rental to rental. I didn't know that either. Not your personal residence.

You can't pour it into your personal residence. And you can't sell your personal residence. You can't pour it into your personal residence. And you can't sell your personal residence. So pay the $75,000 in taxes, take the gain out, and buy you a nice house in Tampa, Rob. That's the answer. Sounds good. You don't have any other options, really. That is your best choice at this stage of the game. Now, 1031 is about moving investments around.

So you can do it with a ranch or with a farm. As long as it's income producing. Okay. Yeah, like I had a friend that had a lake house but he never rented it out so it never produced any income and he sold it and we were going to try to do a 1031 for him to get another lake house from lake house to lake house and i'm claiming that's like kind and the tax guy looked at me cross-eyed like i was an idiot because i was an idiot and and he said you know no you can't do that because it never produced income. If he'd been renting it out occasionally as a resort rental or a B&B or, you know, VRBO or something, he probably could have done it to the – moved it to a different lake house. But lake house to lake house doesn't work.

Doesn't work. And I ran into that a few years ago on a transaction I was helping a neighbor with. So what's the government's – what is their long-term play? You know what? We'll do this another time. Why they even would allow a 1031 exchange? Well, they used to allow trade. You could trade properties and not have to pay the capital gain. That was all they did.

Oh, okay. And this is effectively a trade. Okay, but they'll get it at some point. They're going to get it at some point, unless you die, and then there's stepped-up basis and you don't. Okay, lots of crap. That puts this hour of the ramsay show in the books

this is james child producer of The Ramsey Show. Did you know The Ramsey Show is one of the most popular podcasts in the world? Subscribe or follow today wherever you listen to podcasts. We'll see you next time.