All Forum Posts by: Andrew Albritton

My inlaws have very little to do with the day to day management of the farm, my MIL is just inheriting her portion due to the passing of her father, so I know even less of the details. 

They are in the process of selling it now, the family just wants to exit the business. 

I'm pretty sure farming isn't easy work, but again, I have no experience with it.

The land does have an irrigation well(s). Not sure how many, but enough to irrigate all the trees on the land. As far as "legal water rights", I have no clue, but I'm sure everything is in order as they have owned the farm for a long time.

They do have workers, there are thousands of trees to take care of.

I have no idea on income, but from what I understand almonds are pretty lucrative. Central Valley California grows something like 80% of the world's almond supply. I'm sure the market varies year to year though.

There is a hulling building/equipment with office space. This allows them to take contracts with other growers to shell their product as well. I would assume all farm equipment is included with the sale. The land also has a ~3500 sq ft house on it that MIL's parents occupied, seperate from my inlaws place. No strawberry bushes, but various fruit trees (persimmons, oranges, grpaefruit, etc)

No idea about the condition of the farm equipment.

They aren't looking to owner finance, so you would have to come with a check for the full amount at closing.

Sorry, no almond milk bearing animals

I don't believe the farm is organic

@Dave Foster, awesome, thank you for the insight. 

I'm trying to compile some strategies for them. Their situation has a lot of moving parts. Not only are they looking at the sale of the 600 acres (which the step up basis hopefully should take care of a lot of the capital gains) and their primary residence, but they also have a plot of land on the other side of town that they invested in with MIL's siblings that will be subject to capital gains. I have a list of questions that if you have answers to, I would appreciate hearing your thoughts:

1. As they are not in control of the land sale, and the timing of it, is there an option to keep the proceeds in an escrow account or some other method to execute a 1031 exchange beyond the 45/180 day rule? or is that rule final?

2. It is my understanding that a vacation/second home can be purchased with the caveat that it must be rented at minimum 14 days per year for at least 2 years, while personal use cannot exceed 14 days or 10% of days rented, whichever is less. After the 2 years, is it safe to use the property as you please, or is there some sort of paperwork/form to convert the property to personal use? How many properties can this be done with, either concurrently, or at different times? Can this be done for a primary residence as well? Buy property, rent it out for 2 years, convert it to primary?

3. Can they use a 1031 exchange to buy my wife an I's house, and then rent it back to us at FMV? Would I need to have my wife file a quitclaim deed to make it work?

4. They have made it known they wanted to give my wife and her sister money as a down payment for a bigger house once the propert(ies) sell. If the above situation is allowable (question 3), does the purchase price have to be at FMV, or can they buy the houses at a higher price, using the 1031 to shield against taxes? If so, if the houses were sold at a loss in the future, could the loss be counted against the carryover capital gains from the original property(ies)?

 So it's possible to rent it out for a period to make it eligible for a 1031 exchange, and still be able to use the primary residence exclusion? They can be used concurrently?

Hi all,

My inlaws are considering selling their home that is sitting on 5 acres surrounded by 600+ acres of almond farm that was owned by MIL's father, that she is inheriting along with her 5 siblings. The farm is in the process of being sold, and I'm assuming the step up cost basis will save them considerably in taxes (unless I'm misunderstanding the definition of that rule). Are there any costs/taxes involved in this sale that I'm not considering? I suggested a 1031 exchange if the capital gains turn out to be large enough to trigger an expensive tax bill.

As far as their personal residence, they are due to profit well above the $500k allowance for tax avoidance (not sure of the proper term... it's late lol). Are there any other avenues that might be possible to save them from a big tax bill? They are both on Social Security, if that matters.

I plan on attending local REI club meetups, maybe I can get a pulse on what others who are more experienced are up to.

Being within a 2 hour drive of San Francisco has me contemplating how the market out here would react if California ever finishes the high speed rail that has been in planning. That will allow an easier commute from the central valley and hopefully drive prices up.

I hear what you're saying. I would almost be willing to be cash flow neutral on another property if I knew that rent increase and the type of appreciation that the area is seeing right now would continue. However, I realize that real estate is probably later in the cycle and am assuming that the growth can't go on forever, so I'm stuck in the indecisiveness of trying to wait until the market drops, or finding the best deal I can and hope for the best.

From what I have read on this site, there are plenty who are very successful doing so. Gathering the knowledge and confidence to feel like it's an investment decision rather than a gamble is the part I need to overcome.

Thanks, I will look into it.

@Andrew Syrios Thanks!

@Blake Edward Thanks for the welcome!

I am not finding much in the way of buy and hold properties that meet the 1% rule in my area. Granted, my search has been limited to the MLS and other online search tools. I plan on attending the local REI club meetings and broadening my network, so hopefully that will change. I feel fortunate to have have found the rental property I have back in 2013 when the market was just starting to recover.

I am interested in OOS markets, however I am still defining my criteria in regards to cash flow vs. appreciation (preferably a bit of both), and as stated before, leery of not having the ability to monitor the property as closely as I would like.