All Forum Posts by: Palani Willingham

 Sorry that happened to you.

Bite the bullet & stay 2 years and sell with no cap gains.

make sure to take in consideration your fees when selling - Probably 6-8% after all said and done. 

If you don't have a ton of equity you could just be coming out even.

If you sell now you probably will be in the hole bc of the 6-8% fees for selling 

Palani, 

Not much that I can add on the next steps front but I do want to applaud you on something. 

You took action! That is more than a lot of people do. 

Learn from this and let it inform your future strategies and decisions. 

You got this. 

-Ben

@Palani Willingham

Sorry to hear. The only thing I'd add for the next purchase: the responsibility of due diligence is yours alone. Trust the agent, but verify. Interpreting legal docs such as the CC&Rs fall into attorney territory which an agent is not licensed. Many will perform that service, but that opens them up to liability.

Another approach is to confirm your understanding of the rules with the property management company or the HOA board. Its not fool proof, I've seen plenty of HOAs sued due to lack of understanding over their own documents.

@Palani Willingham

Have you double checked the CC&R's and confirmed this is the case, or talked to the HOA board?

Definitely confirm this is the case IN the actual documents before making a large decision like that. 

They could have been a short term renter potentially..?  Maybe not, but definitely confirm. 

Have you fully reviewed the rules of the contract and HOA? You are probably right, but if it's just one "article read" - there could be further options to review? For example, many HOAs are not 100% black and white - no rentals allowed vs. all units allowed for rent - there may be limits on # of rentals, you may be able to apply for a permit, they may allow rentals only after a full year or so of living in the unit, etc. Make sure you learn all the actual rules in place before chalking it up as a fail!

You can still house hack the property by having people live with you. What you can’t do is turn it in to a rental. This is something you should certainly have caught when you read the CC&R’s. They are given to you with 3 days to look them over. Then you sign saying you read them and understand them. 

Do you have any gains to be taxed? It will probably cost you 8-10% to sell. Are you saying the property is up more than that in 5 months? If so your agent did a great job finding you a steal. 

Figure out how much of a taxable gain you will have after paying all your closing costs. Then you can figure out the tax differences. Less than a year, taxed as regular income, after a year 15%, after 2 years tax free. But it’s probably almost zero today unless you got that steal. 

If you don’t want to move right away I’d just house hack it for a year or two until you’re ready to move out and then sell.