All Forum Posts by: Cody Anderson

I recently learned that if you owner occupy a residence for part of the 5 previous years before sale, and you rent it for the remaining time, you can calculate the percentage of time the property was owner-occupied (and thus qualifies for the sec. 121 primary sales tax exemption of up to $250k for single filers) vs the time it was being rented (which qualifies for 1031 exchange) and claim both benefits. 

https://hcsequity.com/blog/combining-1031-exchange-with-121-....

How does this work for a multi-family?

Love the way you and your friends are thinking about this, Mike. Kudos to you all for taking the time to address the main considerations (timelines, finances, relationships/family planning, etc) before getting too far down the path. 

The model you should go with will ultimately depend on what the group is optimizing for (cashflow, appreciation, tax optimizations, diversification, and maybe even a little bit of social value doing something fun, potentially lucrative, and unique w friends).  

If the trust is there, and you are optimizing for costs and tax benefits, I think the move would be to go with a tenants in common ownership model. Again, depends on how you're planning to use the property (exclusively investment, blended occupancy/rental, or full-time occupancy) - if investment only an LLC would be the move.

All of these factors/considerations impact each other to some extent and its impossible to know whats possible until everyone in the group is clear on what they need/want this to look like.

Either it sounds like you're on the right path with the line of questioning. 

Happy to be a resource to you and your crew at any point

This is for all the 'co-own curious' folks out there.

I recently started a project aimed at making it easier and more affordable for people to co-own (and manage) homes together. 

If you have a property (SFH multi-family, apt, condo, etc) and you are open to/interested in owning it with others (friends, family, other investors) I wanna help you make it happen.

My goal is 1) to help you build the case (and financial model) for shared homeownership using real-life examples and 2) to get feedback from folks outside my network on the process i've created. I figure if I can get really good at helping people design shared home plans, then maybe I can create a business around it.

There’s no pressure or obligation here—this is just an opportunity for me to learn and help. 

Here’s what a 'co-ownership consultation' would look like:

- We review an active listing of your choice to:

• - Build a cost-of-co-ownership model for the property which includes:
  • - Individual ownership and ongoing cost assumptions
  • - Modeling potential rental income for short-term rentals
  • - Modeling financial outcomes from various exit scenarios
• - Tax benefits and considerations of shared homeownership
• - Pros/cons of different ownership structures (joint tenancy, LLC, tenants in common, etc)
• - Talk through the legal agreements (I am not a lawyer and this is not legal advice but I do have extensive knowledge about TIC and other co-ownership agreements)
• - Briefly discuss some of the ways AI is making the work that goes into successfully managing a shared home easier

If you're interested, here's what I'm asking:

• - You’re a U.S. citizen or permanent resident interested in co-owning in the U.S.
• - You choose a property that’s actively listed and something you'd realistically be interested in co-owning

Shoot me a message if you're interested and open to 30ish minute chat.

Thanks!

Hey Jimmy - Hows the multi-family hunt going? 

I lived in SF for 8yrs and am out there regularly (including next week). I've co-owned property with family for nearly a decade while also doing tech stuff while living in the Bay.

Currently focusing my efforts on house hacking via tenants in common (aka house hacking with friends) and have also been looking in SF and Tahoe.

Happy to connect sometime if you're up for it. LMK.
 

House hacking feels like the move to get started. I was just helping two friends navigate this process for a duplex they purchased in WA. One was living there full-time the other part-time (in the same unit) while they rented the other.

Have you thought about co-buying? Could help you afford a larger/nicer property while still giving you a clean living/ownership structure. I've co-owned the last 8 years and would on the whole recommend it if you do it with the right people and make sure you have a solid co-ownership/TIC agreement in place.

Happy to help if you're interested in going this route.

are they being used solely for CRE or is it happening in residential as well?

Can someone explain to me why participation mortgages are no longer in vogue? They seem, at the surface, to be a logical instrument for long term incentive alignment, especially in today's market.

Hey Gerardell - This strategy is indeed effective and to one of the previous comments, staying there for two years will qualify you for the section 121 primary residence tax exemption at the time of sale. 

Curious how you and your friend will be managing the financial contributions and ownership structure? Is he just going to pay half the mortgage in the form of rent are is he going to hold equity/title in the property?

If you are planning to spend time in any of the units during the first year the best thing to do would be to communicate to the lender that the building will be occupied as both a primary and secondary property by the owners. 

From what i've read online (not financial advice) the bank only requires one of the owners to use the property as their primary to qualify for a primary financing.

From what I understand this will also very much depend on the internal guidelines of the particular lender you're talking to. 

Either way I'd be curious to know how this goes for you as I too am looking at a similar situation.

I am looking to purchase a home with my sister in CA. We will both be on title and are planning to split costs and ownership evenly. \

I intend to owner occupy the property while she will use it more as a second home. 

Curious how lenders will evaluate us for a joint mortgage if the home will likely be used as both a primary and secondary residence. 

Will this impact our ability to get competitive financing (we are both well qualified as individuals and even more so together)?