All Forum Posts by: John Clark

Most states are taxing the CAP Gains as income for another 5%, then you have millionaires tax in MA as well. And then there is the Obamacare tax. The actual tax amount is often not the issue, it is the principal. These are folks who have never had a $50k annual tax bill, so this is unbearable for them. Also, many have pensions and have never even touched their nest egg.

There has been growing discussion about how capital gains tax laws are reducing the inventory of homes available for sale in high-appreciation areas. Specifically, homeowners who have lived in their properties for many years may find themselves financially disincentivized from selling due to the tax implications of their appreciated home values.

Consider the following example: A homeowner purchased a house 20 years ago for $250,000. Over time, the home has appreciated to $1.5 million. The homeowner, now older and living alone after the passing of a spouse, would like to downsize to a smaller home or condo that better suits their needs. However, upon selling, they would face a $1.25 million capital gain. Current tax law allows an individual to exclude $250,000 of that gain if they have lived in the home for at least two of the past five years, leaving them with a $1 million taxable gain. With a retirement and Social Security income of $65,000, they could owe approximately $260,000 in long-term capital gains taxes.

By contrast, if that same homeowner had moved every five years, upgrading to a larger home along the way, they would now own a property worth $1 million instead. Their capital gain would be reduced to $500,000, and after the same $250,000 exemption, they would only owe taxes on a $250,000 gain—resulting in a significantly lower tax bill of roughly $55,000.

This discrepancy effectively punishes long-term homeowners who have remained in their properties, disproportionately affecting those who may now find their homes unsuitable due to aging, changing lifestyle needs, or financial strain.

The capital gains tax exemption of $250,000 per person ($500,000 for married couples) has remained unchanged since 1997. If adjusted for inflation, that $500,000 exemption would be approximately $985,000 today. Increasing this threshold would likely encourage more longtime homeowners to sell, freeing up inventory in a housing market that is already struggling with supply shortages.

Revising this outdated exemption would not only provide financial relief to those who need to transition to more suitable housing but also help ease housing shortages by making more homes available to younger buyers. A simple policy update could have a profound effect on housing mobility and affordability, benefiting homeowners and prospective buyers alike.

Hello, wanted to get peoples thoughts on long distance rentals and how I should best prepare --

I have two 3 unit buildings in Chicago that I have owned for several years. We started house hacking back in 2018 and lived in one unit for 5 years. Prior to our first son being born, we purchased a second 3 unit building and currently house hacking that for the past 2 years. 6 units in total with us living in 1 of the units today. All long term tenants with 0 turn over (so far). My rents are a bit below market rate but no tenant turnover is nice.

My wife and I are looking to move out of Chicago to San Diego in the next 12-18 months. We are currently making roughly $1k per month house hacking all units and would earn a bit over $4k per month with all 6 units + garage spots rented out (Rental income - PITI). Total value of the 2 properties is roughly $1.5M and I have close to $600k in equity.

The buildings are both 100+ years old but I have done my best to do capital improvements over the past several years. Updating pipes, electrical boxes, roofs, appliances, etc. I also have a good network of people I trust (electricians, plumbers, painters, roofers, etc) but I do not have a reliable handy man. I typically do most small jobs myself or find random handymen who do a decent/poor job.

All leasing/property management is done by me today and I think it will remain that way in the future, even from afar. I would farm out my local friends/baby sisters to help do showings if a vacant unit arrises. I also thought about leveraging my Chicago network (friends + neighbors) to keep an eye out of the properties from time to time. All tenant issues would still come directly to me via text/email/call and I can be the middle man to broker the communication with handyman/repairs/etc.

I have handled issues remotely before in the past while on vacation for a few weeks (pipe burst, sink clogs, broken appliances, etc.) While not fun, I have managed to get through the issues and returned home to everything being solved.

My biggest challenge is finding a handyman I can trust for simple/small/medium jobs. How have you found handymen in the past? Where have you found success finding them? Any details you can provide would be helpful.

Since I have the next 12 months to plan for this, I am open to any additional feedback/suggestions on what else I should think about. Based on the cashflow, I think it makes sense to hold onto these versus sell but again, open to ideas. Thanks!

I would be very careful with compensating tenant's for maintenance items that were repaired quickly. It would be different if they had to relocate. I have compensated tenants for no heat in cold weather so they could stay in a motel while it was being repaired. Once you offer a compensation such as this, it could be expected. I am not an attorney but would love to hear opinions on whether this practice could set a legal precedent for the remaining lease term?

 Have your attorney file a lis pendens on the property.  No title co will insure with a lis pendens, and no buyer in his right mind will buy.  It's called playing HARDBALL

Hi BP - I have tenants asking for a $500 rent reduction for one month due to maintenance issues since they moved in, in September. The most recent being a leak in the roof, which caused damage to the living room ceiling.  At times a decent amount of water coming through. They were home and were able to manage the situation, so the water didn't make it's way to the floor, which I'm grateful for. However, they weren't happy  about the leak and disruption. Other issues have include; rodent's, which led to two dishwasher hose replacement, washing machine hose replacement, two garbage disposal fixes (one being tenant's fault), and a frozen pipe. I addressed and mitigated these issues within days of notification.

What have others done in a situation like this? I'm happy to provide some reduction, mainly as appreciation for managing the leak and to help make the ceiling remediation/fix process go smoother. I was thinking around $300. That said, I also don't want to sent a precedent they feel entitled to compensation for every maintenance issues.

Note, I'll be selling this property in the near future, which they will have to move out prior to the lease ending. Will have to navigate this situation in the very near future as well. 

Appreciate the insights, 

Chris

 oh i see now. It was filed feb 11th. the county clerk received & stamped it on feb 24th.