All Forum Posts by: Jim T.

Since the townhome is under HOA, I would contact them about all HOA rules the neighbors violated.

Also, I would try to contact the owner of the unit. That does not always work but most landlords want compliant tenants.  

@Elizabeth Goff

Thanks for this. very good info. I also sent in a request for clarification. I will also share what I find. 

..Jim  

In late 2017, Governor declared a few counties in California "Disaster Areas" and CPC 396 comes into play forbidding rent increases exceeding 10% for the 30 days after the declaration. According to CPC 396, it can be extended up to 6 months. Well, Governor Newsom extended it at the end of 2018 for another year and just extended it for yet another year (until December 2020). 

The wording of this ordinance seems to say the rent can't be raised above 10% above where it wss before the disaster was called. It seems CA is using this as some sort of rent control by prohibiting increases that total over 10% for the entire 2+ years (and counting) years. 

Is my assumption correct? 

I am not sure I understand your question but since the subject is Mello Roos, I will interpret the question as "how do I deduct Mello Roos from my taxes?".

Since Mello Roos is generally part of the property tax bill, it will be included in your property tax deduction.

For small investors, such as me, here are the big things to consider to be exempt from this bill

1. The property has to be "alienable separate from the title to any other dwelling unit" meaning a separate deed. Condos generally  qualify as there is a separate deed per unit.  Earlier drafts included the phrase "single family residences"  instead which would not have included condos. Thankfully the state senate cleaned this up to include condos. 

2. The owner can't be a corporation or an LLC with any portion to a corporation.

3. You have to include the following in your lease
“This property is not subject to the rent limits imposed by Section 1947.12 of the Civil Code and is not subject to the just cause requirements of Section 1946.2 of the Civil Code. This property meets the requirements of Sections 1947.12 (c)(5) and 1946.2 (e)(7) of the Civil Code and the owner is not any of the following: (1) a real estate investment trust, as defined by Section 856 of the Internal Revenue Code; (2) a corporation; or (3) a limited liability company in which at least one member is a corporation.”

Please reference AB 1482 for details. I just included snippets and paraphrased others. There are other restrictions.

There is another rent control bill getting signatures now sponsored by the same guy that did the failed Prop 10 last  last year. I have not seen it but I read that it will exempt those investors with 2 or fewer rentals. I would guess this bill will not pass as most voters will be content with AB1482. 

For me, the ability to end tenancies without just cause is more important than the rent limits (which exceed what I have done anyway). I am not planning to sell any rentals ever but my heirs might. I just want the flexibility to be retained. 

The fact it does not include anything to limit vacancy decontrol is also inportant. Most small landlords I know keep increases moderate until a tenant leaves in which case they price back to market rates. If vacancy decontrol were prohibited, landlords would have no choice than annual market increases. 

So, how will a small landlord fare with AB1482 limiting corporate apartments while being exempt? My thoughts:

1. The bill allows 15 years of exemptions for new apartments. I don't think that is enough for large buildings. I think this will limit any new large projects. 

2. The bill will pull most existing apartments into these rent restrictions. These units, in hot areas, will likely get the max increase (5%+inflation to a max of 10% per year). I have never given an existing tenant a 5% increase, let alone a 5%+inflation increase. 

While limiting new units to come to market and allow existing units to climb at 5%+inflation, it seems the small landlords that are exempt will have better flexibility and options going forward. As long as your portfolio is exempt from AB1482, it seems rentals in California will continue to be a good investment.   

Disclaimer: All the above are just my personal thoughts. I am not a lawyer and the interpertation of AB1482 is mine alone. You should consider that some or all of what I stated is completely false. I gave my thoughts merely to give some ideas to research.   

This question is not really for me because it won't make much difference for me but I want to throw it out there to see if the tax experts can weigh in. Perhaps it would be helpful for others.

Can you deduct the state income tax paid for the rental income on Schedule E? Possibly calculating the percentage of rental income to all income and multiplying that by the total state tax paid. The reason this might be helpful is some people may be limited on deducting state income taxes because of the SALT limit of $10,000.    

 Thank you MIchael!

All properties are titled the same, a trust name belonging to my wife and me. 

I have all the supporting paperwork. Using round numbers, $300,000 was borrowed to payoff the primary home ($200,000) and rental ($100,000). It seems I would be entitled to 1/3 of the interest. I just don't know how to communicate that on my tax forms. 

Thanks again Ned

..Jim

I have a tax question that I hope someone can point me in the right direction.

I had a loan on one rental and a loan on my primary home. In 2016, I refinanced my home in 2016 loan and cashed out enough extra to pay-off the rental loan. I now have one loan and receive one 1098.

Can I split the 1098 in two parts, one for the primary home and one for the rental? For 2018 tax year, I am taking the standard deduction so I am looking for a way to deduct that part of the loan that was used to pay-off the rental.

Thanks in advance for anyone that can help

I think I understand what you are asking. 

A mortgage payment is split into two pieces, interest and principal. The interest is deductible. The principal repayment doesn't show up anywhere on the tax forms.  

With a modified form of your example  "e.g. is $10k worth of interest payments and $5k of amortization principal payments in a year a $10k deduction or a $5k deduction" 

The $10k interest payment is deductible. The $5k principal payment is not.