All Forum Posts by: Charles Ma

Hello BP, 

I've been looking up the nuances of this gain exclusion but wondering if there any any people here who have managed innovative ways to meet this primary home capital gains exclusion rule while getting creative with it, legally.

So I closed on my current primary residence 4/26/18. My wife and I file jointly, and we currently would like to sell this primary, and ideally take advantage of the exclusion. However we claimed this exclusion on the last primary we sold, and that was just closed in July 11, 2018. As I understand it, this exclusion can not be used twice within a 2 year window. 

If I sold the current primary, and closed past July 11, 2020, I suppose we'd be ok here. But spring is the main marketing season while June is pushing close to summer slowdown (if not already in it). So Ideally I'd like to throw the house up on the market in April to gain the best exposure and in theory - a close in May / June is feasible given typical time frame to close (house is in SF proper). This would leave a 1-2 month gap from close to make it past July 11, 2020. 

Does anyone have any strategies on how to structure a sale so I could capture the best value for the house, while also meeting this 2 year rule? Would it be as simple as requesting a longer close time? What other nuances am I overlooking here?

Any insights greatly appreciated!

Hello all,

I've been considering outfitting an empty commercial space I've got for permanent use as a short term event / offsite / networking / all of the above type of space, and use platforms such as Peerspace and Storefront to market it. 

Just reaching out here to see if there are any landloards / investors here in San Francisco doing this? Very curious to understand the demand and potential viability of this plan. Also would be greatly helpful to understand where the demand stems from - corporate offsites? private networking events? private catered dinners? 

My building is ground floor storefront space in the 'La Lengua' part of Bernal, on Mission St.

thanks in advance!

Thanks all for chiming in - all good points. A lot of the things mentioned solidify the original intention of selling. I'd have to agree with you @Amit M. on the fact that building out luxury and renting would just really be a disservice when comes time to sell...and if a rental in the first place, it should be built to suit. I think the 20K is feasible but it's not fully reliable. Regarding construction costs - generally speaking, yes, construction costs are high, but it just really depends how many people are in between you and the person who is swinging the hammer. My background is architecture, and I'm now GC'ing my projects. So in most cases, I do my own drawings / permitting and cutting out the GC is a huge savings, and decrease in headache (depending how you view it of course). While subs can still demand project pricing, I keep many parts of the construction process in house with my own crew that I pay by the hour. Of course this all means that I end up doing a ton of the work, but keeping it as lean as possible has been working so far....though scaling and pulling myself a bit further away from the 'working in the business' part of it goes hand in hand with building up the nest eggs. 

Cap rates are low, and buying into tenants are a headache. Curious to hear how your buildings pencil out as it seems like you are buy and hold in SF. 

@Gil Vaisman - if I were to rent it to full time tenants, then I'd agree. but I lean more towards monthly rentals as tenants have a finite time period in which they have possession of the property. I think 20k is feasible for some key months, but my gut says it might be hard to maintain that consistency.

@Jake Van Vorhis  - Hopefully you're right! As mentioned, it is hampshire and 25th. 

@Ariel Smith - your name sounds familiar - i think we've traded emails before regarding another property. Good to know the stats on 3 bed places and lower demand. What are your thoughts on how to position the property to capture these types of rates?

for comparison sake, lets say it would sell at the same ppsf of 850. My expenses are the same because I'll have already commited the ~20k for condo application/survey/lawyer early on in the process. 

however, moving properties at that price point seems a bit more difficult in our market these days, which is why splitting the price into 2 units makes it more feasible. 

but...you never know....a 2 unit TIC up the street just came on the market at $6M!!!! It would be a miracle if they got that price, though of course I would be thrilled ...but not holding my breath

Hello BP nation - I've got a development project in SF that I'd like to share some details on.

I'd like to just get this project out of my own head for a bit and try to solicit some different opinions on exit strategy.

Would greatly appreciate any and all feedback.Thanks all in advance!!

acquisition:

$1.2M, 1,600 SF single family house

development costs:

$1.3M (inclusive of all construction, consultants, permitting, bank fees / interest, prop tax, insurance, utilties etc).

sales costs :

~$250k (incurred upon sale only - broker fees, transfer tax, staging, closing costs)

time / carry:

acquired Jan 2015

expected completion May 2017.

finished product:

2 new construction luxury condo units, 2 floors each:

Lower unit - 2,250sf - 3 bed, 2.5 bath - one car garage spot (side by side) - deeded entire backyard (approx 1,000sf)

Upper unit - 2,250sf - 4 bed, 3.5 bath - one car garage spot (side by side) - two large decks (master bed and living room) plus deeded ~500sf roof deck with nice views spanning bernal hill to sutro.

Shared garage between the two; approx 600sf. All in all, gross SF for the bldg is ~5000sf.

Targetted sales price:

Going off a relatively conservative sales per SF price of $850/sf, total sale should be $3.8M

Back out all of the above and the potential profit is $1,050,000.

The potential for that 1M profit obviously is very attractive. I also rented out the house for 15 months prior to construction, so if sale is triggered, it will be cap gains.

For the past 4 yrs, I have been primarily in active developer mode - buying, fixing, selling.

However, the goal has always been to spend a lot of time and energy in these 'earlier' years setting up a bunch of nest eggs for the future. Given the location and the price that I would eventually pay to hold onto the units (assuming I could get perm loan to pay off construction loan), I'm looking at ~$2.5M for 4500 sf of brand new San Francisco real estate - which comes out at ~$555/sf - a steal by any measure in SF.

From the investor POV however, even at $20k (I know this is high, maybe achievable through homesuite furnished...maybe not) of rental income per month, with the following assumptions:

- 20% vacancy

- 1.15% prop tax

- 3k insurance

- 5k annual maint / upkeep

- 10% prop mgmt fees

- 4k utilities

- financing 70% ltv at 4.5%

the numbers come out to approx:

- 3.5% cash on cash

- 5.3% cap

- roughly 26k annual cash flow after all expenses etc etc etc

The obvious choice would seem to be sell this off, move onto something else - another development or maybe MF rental via 1031. But given the nature/desirability of property in prime SF, it would seem like there would be an opportunity cost in selling this off for an immediate gain. The issue is of course that the potential returns from holding as rentals pale in comparison to selling it off, or so thats how I've been viewing it thus far. I feel there are different options to consider, but I've just been stuck on the fact that rentals just can't work in SF, even when you are holding at developer prices....I would greatly appreciate some different viewpoints on how to analyze this exit!