All Forum Posts by: Dakota Sullivan

Hi Margarita;

I'm based in Sac but looking right now also in Yuba City for SFH to rent. Last fall I put offers in on some properties in Grass Valley and Nevada City at prices that would at least break even on initial cash flow, but sellers still thought it was Q1 '22 and would rather take their properties off market than sell for less than what they considered them worth.

There are a couple of RE Meet Ups in Folsom and Roseville that are a little closer to you than Sac. The Roseville one is pretty popular, haven't tried the one in Folsom.

I'd be happy to share what I'm finding in Yuba City, just ping me with your email.

Quote from @Marcus Auerbach:

Before a real estate market will slow down, let alone correct or even crash you will see inventory go up. Inventory is a leading indicator and a necessary condition for a correction. As long as supply is critically low and demand is high there is no change. As long as we don't have at least 5 months of supply, this debate is pointless.

Anything is possible in this world, but a crash is just not in the data.

Actually things have been heating up again the last couple weeks after a slower July. Inventory is still super low, no additional inventory anywhere to be found, now seller's are clinging on to their 2.5% mortgages making inventory even more rare, meanwhile rents are going up and demand is strong - once a millennial has decided to buy a house and they have a baby on the way, there is no going back.

Agree supply and demand are the forces that really matter.

Demand has fallen and continues to weaken as mortgage rates creep up, stock wealth erodes and job insecurity rises.

But supply is still so tight, the impact is minimized.

Here in the Bay Area however, we're starting to see the other side of the equation shift. Beginning to see second homes come onto the market in places like Napa, Lake Tahoe, Reno as belts tighten. Now also starting to see STRs being listed, since belt tightening is creating a slowdown in travel. It'll be interesting to see AirBNB's earnings and forward guidance this quarter.

Next domino to fall may be folks laid off who need to downsize or relocate. Here in the Bay Area, everything hinges on tech. Several of the big companies (Intel today, Noom, Oracle, Twilio, DocuSign, Meta, others recently) have announced layoffs or hiring freezes. There are 182,000 tech workers in the Bay Area. Let's say 10% of tech folks are laid off before the recession ends. Other jobs depend on them--construction, banking, entertainment, etc. Net, net, let's say 20,000 people in the Bay Area lose their jobs and can't immediately replace that salary due to hiring freezes, general economic contraction.

Agree with Marcus that there's no way we see another 2008-style panic given all the factors he cites. However I do think there will be a lot more inventory of all types next year and many more highly-motivated sellers than we're seeing right now.

Thanks both for your feedback. Dave, that approach sounds like it could solve our problems. We've had realtors approach us about clients wanting to rent luxury homes in our area, so we could probably generate positive cashflow on top of the tax sheltering. Of course the risk is that the froth has come off the market in a year and we're not able to achieve the sale price that we would today, but this give us another great option to consider.

Hi BP fam;

CA resident here looking to shift equity from personal residence into primarily income producing stock. Due to runup in home prices in Bay Area over 10 years I've held my personal residence, I'm facing seven digits of cap gains. 

I'm familiar with the exclusions tied to principal residence that could shelter up to $500k between me and my wife (subject to earned income contingencies). I've also looked into Opportunity Zone funds, however they lock any funds invested up for 10 years and as of 2022 lack some of the previous benefits (up to 15% reduction in tax in 2026). However, two big questions that I need advice on:

1) Any shelter strategies for CA state cap gains tax? This is a killer and I can't find anything even acknowledging the state tax bite, much less how to minimize (if even possible)

2) If I want to roll a portion of the proceeds into a new personal residence, must I pay full cap gains on those proceeds then invest as fresh cash? There's nothing even approaching a 1031 strategy for rolling one personal residence into another without full tax burden on any cap gains?

Thanks in advance for any direction here.

Dakota