All Forum Posts by: Jeff Cliff

Hello,

I have a single family house in Northern California which is my primary and it has solar panels. My solar system was grandfathered into NEM 2.0 with Pacific Gas & Electric (PG&E). 

I am planning to rent out this house to a tenant and I have a few questions I need clarification on.

1) If the tenants change the utility service (PG&E) in their name how would it impact NEM 2.0. I read something called NBT (Net Billing Tariff) may apply but I am unclear how it would impact tenants and if the landlord were to move back into the house after tenants move out?

2) My current true-up date is May every year. Hypothetically, if new tenants moves into property in August and transfer utilities in their name, would the true-up date change to August as well or would it continue to be May. If it stays May how do you figure out the true up share of landlord and the tenants?

3) Would it be a better idea to keep the utilities in landlord's name and have tenants pay the bill? In this scenario again how would the true-up charges work?

4) Are there any specific addendums or disclosures required for the solar panels in the rental agreement with the tenants?

Thank you in advance for your response.

Current situation:

Primary Home: Owned for about 15 years and has appreciated it a lot. I have been renting part of the house on a long term/short term basis and have been showing all income on my tax return and have been taking depreciation on the part of the property as well as required by the law. In 2023, I got quite a few home improvements and maintenance work done on the primary home such as brand new solar panels (Jan 2023), a new large storage shed, attic insulation replacement, new attic fan, renovated garage, new epoxy flooring in the garage, new exterior paint etc.I am planning to claim 30% tax credit on my 2023 tax return.

Second Home: Purchased in all cash since financing was not available due to the condition of the house. It has a lot of potential, huge lot and amazing ocean views from a distance. Owned it for about 4 years and has been vacant since I bought it as it needs major rehab work. The original intent was to fix the house and rent it out until I am ready to retire in another 20 years or so. However, due to unavoidable circumstances, I have not been able to rehab it. In early 2022, I did cash out refinance on my primary home to come up with the money to fix this second home. I think I have enough money in reserve to fix this second home now.

Twist in the story, I got laid off recently which puts me in a bind. Since, I don’t have to worry about family situation; I am contemplating on renting out my primary home and moving to second home and starting rehab work on the second home.

Advantages:

• 1) Reduces my immediate liabilities even if there is a tad bit of negative cashflow.
• 2) Since I did significant amount of cash out refinance over a year ago, converting it into an investment property I should be able to take full deduction on the interest I would pay on the entire amount original loan plus the cash out refinance, correct me if my understanding is wrong.
• Possibly, all the maintenance and improvement work I did in 2023 on primary home could be used as expenses to make the property ready for rental (unsure about this though)
• 3) If I never move back to the primary home and keep renting it for at least a couple of years or more and eventually sell it I could potentially do 1031 exchange and buy a couple of other properties somewhere else.
• 4) I can finally rehab the second home without having to worry about going out and finding another job first.

Questions:

• 1) What tax implications I should consider in converting primary home to investment property?
• 2) After rehabbing my second home, if I moved back to primary what kind of tax implications I should consider?
• 3) If I did convert my primary home to rental in 2024, can I still get tax credit for solar panels installed in early 2023?

In addition to making primary home to investment property I have a few other options:

• 1) Status-Quo, do nothing to second home, keep renting part of the primary home and look for employment.
• 2) Sell the second home and take out whatever minimal profit I could take.
• 3) Stay in primary home, rehab the second home while looking for a job. Once the second home is rehabbed, sell it for a little more profit.
• 4) Any other options you can think of?

Hello,

One of the guests from one of the short term rental platforms stayed for a few months with a home owner in Northern California. Prior to leaving, the guest wrongfully accused the homeowner by stating the owner invaded his privacy by entering into his room in his absence and also somehow electronically interfering with his electronic devices and trying to hack him. None of which is true, the guest never offered any evidence besides blatantly accusing the owner.  The guest's motive is unclear, however, his behavior is extremely offensive, harassing and utterly disturbing for the homeowner. Are there any remedies or proactive measures the homeowner should take to safeguard his interest? Can the home owner take legal action against this guest for mental harassment and wrongful accusation?

Thanks in advance for your response.

How do you determine whether you are better off rehabbing the existing property vs demolishing it and starting from scratch?

Hello,

I am considering adding about 1200 sqft ADU on top of existing one story single family house. A few people advised me against that because of the cost. However, because of the spectacular views I could get from this second floor I am still trying to figure out best way to put second story ADU.

Has anyone added second story on top of the existing house? What all does it entail? How much more expensive does it get?

Let me rephrase the question, if I were to do cash out on primary property and use that to fix rental property can I take deduction on my personal income tax for the portion that is used for rental rehab?

Hello,

I am trying to evaluate different options to rehab a rental property. 

1) I can do cash out on primary and use the proceeds to fix the rental and rent it out

2) Take out HELOC on primary and use the proceeds to fix the rental and rent it out

3) Take a homestyle renovation loan for the rental and use the proceeds to fix it.

I am not sure which one of the above three options would be best as far as the personal tax consequences are concerned. 

Rental property is distressed and needs to be rehabbed so can't really borrow any money on it unless it is homestyle renovation/construction loan

Thank you in advance for your response.

Hello,

I am looking to take out Home Equity Line of Credit, looking for the best place where I can get one that would give 

1) highest possible LTV (>=85%)

2) Minimum spread (preferably 0.25% or <=0.5%); 

3) lowest minimum interest rate in case prime + spread comes out to be lower than their minimum requirement

4) Allows to lock the rate for a portion of the balance

5) No closing cost and no annual fees

If they offer any other promotion even better, If you have any recommendation on banks that would offer such HELOCs please do recommend.

Thank you.

I am doing owner builder and I have some construction specific questions for electricians, plumbers, framers etc. wondering if there is any good forum I can post my questions and get answers.

Hello,

End of last year I bought a severely distressed property IN CASH. When I bought the property I was able to get insurance from an insurance company with some conditions, which I had to fulfill or they would cancel my insurance.

From the beginning I have been running into several roadblocks, pandemic being primary and I am no where near completion of the project, still working with the city for plan approval. I have demolished quite a few unpermitted structures and currently a lot of places the house is boarded.

Since I couldn’t fulfill the condition of the first insurance company, I went ahead and cancelled that and purchased policy from another insurance company. However, after drive by inspection they are cancelling my insurance as well.

My guess is, it might take at least a year or so before I will be done with the project.

My questions are:

1) Considering the property is completely paid, should I get home owners insurance before completing the project?

2) If I should have insurance, most insurance companies I talked to don’t seem to be covering property under renovation, are there other avenues to get insurance? Are they worth?

Thanks in advance for your response.