All Forum Posts by: Gaurav Mehta

Hi,

I am looking to acquire a property in Hayward and want to do this by setting an LLC. I was going through the checklist PDF provided by Hayward city (https://www.hayward-ca.gov/services/permits/accessory-dwelling-unit) and one of the requirement says 

My question is: If the LLC owns the property and if the property is an investment property, are we not allowed to build an ADU on such a property. Is there a workaround for this. Don't want to take this property out of LLC.

Another way would be to build an ADU in an SFR and put both on rental.

Hi,

I am going through Form 8996 required to be filed for a corporation to be considered for Opportunity Zone. I have a few questions on what it means for a property to be a "Qualified opportunity zone business property"

Below is what the IRS Form states

"

Qualified opportunity zone business property is tangible property that a QOF acquires after 2017 and uses in a trade or business and that satisfies both of the following tests.

1. The use of the property in the qualified opportunity zone originates with the QOF, or the QOF substantially improves the property.
2. During substantially all of the QOF's holding period for such property, substantially all of the use of such property was in a qualified opportunity zone.

To satisfy the test in (1) above, the QOF substantially improves property if, during any 30-month period beginning after the date of the acquisition of such property, additions to basis with respect to such property in the hands of the QOF are more than an amount equal to the adjusted basis of such property at the beginning of such 30-month period in the hands of the QOF.

"

Questions

1. What does "The use of the property in the qualified opportunity zone originates with the QOF" in 1 mean?
2. Also, can someone please help explain what the paragraph after #2 from above mean. What does it require to satisfy the test in #1
3. Finally what does the #2 above really mean. Totally lost on that.

@Doug Hancock: You can put your capital gains in an Opportunity Zone fund. Note that you will only defer your taxes till 2026 at which time you will have to pay 85% of the original capital gains tax. So essentially you are saving 15% taxes and deferring them for 7 years.

The appreciation that you see on a property that you buy through the fund will be tax free if you hold the property for 3 more years (total 10). There are more caveats to this like substantial investment has to be made.

To answer your original question, this is a way to replace 1031. In 1031 you defer until you sell but you still have to pay taxes when you sell. In Op Zone, you are limited to 7 years but have to pay 85% of original due taxes.

Adding to what @Mark Creason mentioned, you do need to make substantial improvements to the property for it to be considered as a Qualified Opportunity Zone Property.

Hi,

Trying to find out if Hayward, CA has rent control? Looking to buy an SFR that has potential to add another unit but unsure if there is rent control.

I am looking at downtown and properties are from 1928.

Anyone knows details about rent control.

@Mark Elliott: Are you confident that this does not apply to Single Family Residence only? I am planning to make an offer on a Single Family Residence and a CPA told me that it does apply to Single Family Residences. I am planning to make only 1 purchase.

Where is it mentioned that it doesnt apply to SFR?

@Basit Siddiqi: Yes, I will be setting up an LLC and filling out IRS Form 8996 before I actually make the purchase.

Sorry I am still not clear on what you mentioned about valuation. Like I said, to qualify for Opportunity Zone Property, I need to understand how much I need to spend on improvements and that is something based on Price - Land Value. 

Would the land value be the same based on current tax bill

Does that mean the square footage will increase based on the price I buy it for

Thanks @Basit Siddiqi for clarifying. Yes that is true that this is based on assessor's valuation and used strictly for Tax Purposes. I am actually thinking of making an offer on an investment property in Opportunity Zone. For the property to qualify as Opportunity Zone Property, I need to spend at least $$ =  (Price Paid - Land Cost).

Still not clear on how and who determines what is the value of land and what is the value of square footage. Is that something an appraiser would do or is there an easy way to determine that.

I have a few question about how prices for Land and Additions are changed post sale. Say there is a property listed for $975,000. Based on its most recent tax statement it shows

Land : $18,445

Improvements: $80,666.00

1. Does improvements mean the price of the built house?

2. How would the land and improvements change if the property were purchased at the asking price of $975,000