All Forum Posts by: Marc Estepa

@Bill Brandt that’s a very good point. No taxes on the sale of your primary residence! I’ll toss that option their way. If they went that route, they could potentially pay off their San Diego rental property and have a downpayment for a home in Maui.

I have a feeling they won’t though. I know their primary residence has a lot of sentimental value as their family was raised there, and the Bay Area is where most of their circle of friends and family still live.

They expressed their hesitation to go all in on Hawaii and still want the comfort of having the option of their primary home to live in. It’ll probably be that way until they spend more time in Hawaii and make the plunge to go all in or continue splitting their time. Who knows, maybe they’ll love Hawaii and immediately want to sell their primary residence as you suggested!

Anyway, must be nice to have these “problems” as retirees. They are constantly traveling somewhere new, and enjoying their free time with one another. I hope to have similar “problems” at that age (or younger).

@Michael Anderson thank you sir! Let me chat with them and see what they want to do. I know they have a long time CPA they’ve worked with, but it doesn’t hurt to get another opinion. When they started going into all the tax implications, I just started getting lost in it. I can see why they started trying to read the tax code. I’d rather shoot myself personally. Anyway, I’ll let them know.

@Bryan Vukelich thanks for the contact. Let me get with them and see what they think!

@Bill Brandt thanks for the thoughts. I’ll pass it along for sure. They are in their 70s, have cut their expenses low and are able to live off their pensions with room to continue to travel and save.

They are in their 70s and now having to begin taking their RMDs from their retirement accounts. Their concern is where to put this influx of cash because they don’t need it for their current lifestyle. If they invest it in index funds, they are concerned they’ll end up paying taxes on it again whenever they decide to begin withdrawing it.

I suggested putting it toward the Hawaii home (since that’s the goal) or lending it to me at a low interest rate for my own real estate investing! Hahahaha!

If they outright sell the San Diego rental, that’s obviously a lot of money they can put down on the Hawaii retirement home, fund some remodeling and even pay off their primary residence off - but again they will be taxed heavily.

My assessment is that they are looking to somehow sell the property without paying taxes, and maximize that money to buy their retirement / snowbird home, while also trying to avoid taxes from their RMDs.

Good problems to have! Obviously never being in this position before, I have no idea what to do cause I don’t have as many options at my own disposal. Now, I’m just learning from them are trying to figure out how to put myself in their position when I’m their age.

With all the different tax implications my head started to spin

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@Dave Foster! Thank you! You and I chatted a few years ago when I first got on BP. I learned a lot. Thank you! After you taught me the basics, it was the very first strategy I thought of. Depending on which direction they choose to go, I may just end up pushing them your way. Hope you are well!

It’s been awhile Bigger Pockets Fam! Posting for a friend. My friends’ parents are in their 70s and retired in California. As they have gotten older, they have been seeking warmer climates and want to retire in Maui. They currently own two properties, their primary residence in the Bay Area where they owe approximately $300k and a rental property in San Diego where they also owe approximately $300k, but have about $400k equity.

Their goal is to snowbird 6 months out of the year in Maui, Hawaii, maintain their primary residence in the Bay Area and figure out the most tax advantaged strategy to sell their rental property and use it to buy their 2nd home in Maui. They are also looking to house hack a portion of the Hawaii home to help offset the costs of that 2nd mortgage.

They have pensions that pay for their day to day living expenses, but are just reaching the age where they must take their RMDs from their other investment accounts (which they don’t need at the moment). As a result, they are trying to find every tax advantaged strategy to do all of this without getting crushed on taxes. Good problem to have!

Anyway, they had reached out to me for my take on it and I think a 1031 exchange would be the best way to go about it, but I’m no expert. I suggested they talk to their CPA to ask specific tax questions to better understand the tax implications with everything else they have going on with their finances, and this has led them down the rabbit hole of reading tax codes and the such. That’s just painful, so it quickly discourages them from pursuing their retirement goals and just settling.

I think they have the pieces in place, but are surrounded by naysayers who don’t understand the real estate investing world enough to help them pursue their dreams, or others who simply discourage them. I told them that their first step would be to surround themselves with others trying to pursue similar goals. So, I naturally pushed Bigger Pockets.

I’m not the real estate investor expert, but I think they have all the pieces in place to do this - but wanted to hear from the community their thoughts. Am I advising right or are there other strategies you can think of to help push them in the right direction, maximize their income and avoid taxes as much as possible?

Hey @David M. nice to hear from you again!  This is precisely why I’m asking. I straight up don’t know what I don’t know.  If I’m asking a stupid question (and it seems like I am) then I’ll continue on with the Google machine.

Since we last talked, I've been solely focused on SFH and nothing else. I know how to break down those numbers and evaluate that type of property. We actually close on our primary residence this week! It was a long road getting here, but we finally found one.

Anyway, anything dealing with commercial or mixed use zoning is obviously foreign to me. If I wanted to make that a 6 unit dwelling instead of a 4, does that make a difference in the zoning of area? I know that if I wanted to update a home in a residential area that's easy. But if I wanted to take a SFH and simply turn it into an apartment, I can't necessarily do that. This is the extent to what I know.

After listening to podcasts, I understand that there's some kind of limit to what I can do to update a SFH in a residentially zoned area. But I know that this changes if the area this SFH is located at is zoned for mixed use. In this case, it is. So with what you're saying, I'm assuming I can build more than a 4 Plex? Like I said, I have no idea what my left and right limits are or where to even start with such a project cause I've never even considered such a thing until I came across this one.

If you’re saying I can’t do that based off the zoning, then that’s what I need to know so I can plan ahead. Where do I need to go to look this stuff up and do my homework on commercial vs mixed use or residential zoning and new construction so I’m not asking menial questions here?  

I figured this place would be it.  I thought this would be a reasonable question to put out here for a newbie, especially since I’ve asked some stupid questions in the past that I’m frankly embarrassed to have asked.  

Hello BP Fam!

In my search for SFH investment properties, I came across an interesting property that also doubled as a business. The numbers caught my attention because they would work as a SFH with a few updates and converting the business side to an ADU. But it got my wheels turning even more.

If the property doubled as a business and a residence, I’m assuming this means it’s zoned for commercial and residential.  

Can I level the existing property and build a 4 Plex in its place?  I never studied how this works cause I’m new to investing and viewed this as an advanced strategy.

Theoretically, how do I run numbers on this type of project?  The numbers for this property are as follows:

1. Purchase price: $385k

2. 2 Bedroom, 2.5 Bath, 1540 sq ft 

3. Lot Size: 6500 sq ft

4. Business side has 4 parking spaces separate from the home’s 2 parking spots with room for storage.

If the goal is to tear it all down and create a multi family 4plex in its place, what are my first steps to doing a project like this?  What are the costs I need to take into account - Demolition, Architectural design, New construction?  What are all the hard costs and soft costs associated with this?  

Thanks @Patrick Britton - no, not at all what I wanted to hear, but I understand that it’s the reality of the market.  Money always matters and I’d go as far as to say it’s the #1 variable at play in buying a house.  

As for the letter, that’s interesting.  I’ve held off on it until this last offer, but you’re the first person I’ve heard say they shouldn’t be used.  As a matter of fact, I’ve heard of at least 4 other buyers who used them and 3 other realtors here who have actually encouraged it.  I felt it was kinda cheesy, but after losing out on house after house, I figured why the hell not?

Aside from that, just looking at some creativity to get some kind of leg up on the competition. I know money is the #1 driving factor (to which I’m limited), but people coming in with other creative contingencies or waiving everything to structure a stronger offer are what I’m curious about.  

@Benjamin Seibert, tell me about it.  Initially I wouldn’t even consider a 22AD, now I’m seeing that offers won’t even be considered without it.  I’ve gotten more and more aggressive and waived other things as well.  I tossed in the letter and waived more and more.  I’m trying to make a statement with my offer without necessarily breaking the bank.  So frustrating.