All Forum Posts by: Samuel DeMass

I have a friend who is selling a condo in San Diego and they told me they are being hit with what they called a "State sales tax" that amounts to about 3% of sales price!

To be clear, this is something separate from capital gains tax, from the information I understood.

Having not operated in California, I can't speak to it, but it sounds absurd!

Is there any knowledge out there that enables avoiding this tax?

Any thoughts or tips are appreciated.

Thank you for your time.

-Sam

Steve,

Can you sub-meter the utilities and make them responsible to pay their own bills to the utility company?

Just a thought!

Good luck, and keep us posted.

-Sam

Welcome Lisa!

You've arrived at a great source of knowledge and a community that shares your vision.

What are your friends and family getting hung up on that prevents them from seeing and sharing your vision?

@Rick Davis,

Welcome to BP!

You've arrived at the right location for information, learning, and networking in the REI realm.

I've been keeping an eye on ABQ for a while now.  I'm also looking at multi-family opportunities for buy and hold (cashflow) investing.

Having your background is going to be a great asset to any partnership or investing venture you put your efforts towards.  It's great to have you on the site.

I'll send a colleague request.

Cheers,

-Sam

Thank you all for a great discussion.  I've been investing for a while and have really never been concerned with the implications of taxes due on sale.  This has been a great learning point for me.

Special thanks to @Jon Holdman for really laying out the numbers for us in an easy to consume fashion.

Jon,

A couple up question: 

1.)  Can you point us to a reference or help further explain what you mean when you mentioned "carry forward passive losses"?

2.)  How does it affect the net outcome?

Thank you for your time.

Cheers,

-Sam

Hey BP,

I'm having a hard time visualizing the taxable capital gains on the backside of owning a property.

Here's an example to help simplify my question:

What gets taxed when you sell a property?

Lets assume the property was bought for 100K and financed at @ 80%.  You've enjoyed the depreciation tax benefits for 10 years, but now you're ready to sell it.

You sell the property for 150K and the loan payoff is 50K, leaving a simple 100K difference.

What is the total taxable amount from the sale, assuming standard depreciation was used?

Thank you for your time.

-Sam

@Chris Armistad,

Welcome to Bigger Pockets!

I'm investing in the Albuquerque area.  I'd love to keep in touch and hear from you about what you're doing.  Lets connect.

-Sam

@Aaron Hollingshead,

Welcome to Bigger Pockets!

You've stumbled across a great resource to help you get started and answer questions.  

To be clear, I'm not sure what the exact rules are for your situation.  However, I think there is probably a way to make it work.

In my opinion, I think you could reasonably justify an owner-occupant type loan.  I would talk to your lender to make sure they're informed on the deal, but since you'll have your sister there and you're not planning on renting it out (within the first year) you're probably good to go.

Your local lenders will be able to answer questions about the FHA loan and what the requirements are for occupancy.

Good luck.  Keep us posted, and ask questions if you need help!

-Sam

@Tony Reynolds,

I don't know beyond a reasonable doubt, but I think the requirements to avoid capital gains are very specifically related to 1031 exchanges.

Having never done one, I can't speak to it, but I've read enough to know that the handling of the funds is important from one transaction to the next.

This is something I would definitely be talking to a RE attorney about, like tomorrow.

As a side note, would the buyer be willing to renegotiate closing date to give you time to set up the 1031 exchange logistics?

Good luck.  Keep us updated on your progress!

@Martin Gregory,

The short answer is: it depends.

The long answer is: it depends on a lot of things...

Do you feel safe talking with and collecting the rent from your tenants?  I think this would probably be the first consideration.

Another consideration that may be further down the road for you is, is it worth your time?

I don't collect rent anymore.  I have people who do everything for me, from leasing to minor repairs.  Property Management is something I feel like you should always plan for in a purchase, whether buying an investment property or future investment property (note I did not say home, because odds are you'll probably move and want to rent it out).

I think you're better off buying right and putting a competent property manager in place of your properties.  I've noticed the professionals I've hired are more motivated to get it rented and raise rents over time.  Also, They get paid to do all that work for you.  In other words, you do nothing but check to ensure the rent was deposited in your bank account and move on to your next life experience.

I know this is a bit pointed towards the 'down the road' stage of investing, but I really feel like if you plan for it from day 1, you'll save yourself a lot of headache and give yourself more time to find good deals.

Good luck!  Keep us posted.

-Sam