All Forum Posts by: Tatyana Shevnina

When combining section 121 gain and 1031 exchange, can you take out the section 121 gain or does it have to be included in the cost of the replacement property?

For example, relinquished property is sold for $800K with $600K capital gain, where $500K qualifies for 121 exclusion and $100K is deferred via 1031 exchange. Can you take out $500K tax free and buy a replacement property for $300K? Or do you still need to reinvest the full $800K into the replacement property? I omitted closing costs, etc. for simplicity. 

In prior threads, @Dave Foster (can't tag for some reason) mentioned that section 121 gain is boot, but ultimately becomes tax free once 121 exclusion is applied. From that I gathered that $500K can be taken out tax free. Wanted to double check that my understanding is correct.

Thanks in advance!

@Chris C.  - our firm refers clients to this attorney

Law Offices of Linda MacKay

@Sean Cohen   Welcome to BP!  It's definitely a great place to be and learn.

My little rental condo is in San Francisco :) It's done well over the past 3 years. I wouldn't mind owning a few more in the same complex once prices become more reasonable. 

There are many threads on BP that discuss out of state investing, so you can find suggestions for states, cities in the US that are popular for cash flow and align with your criteria. My suggestion would be to talk to friends or family in the States, if you have them. Learn about their area and see if there are opportunities. It helps to know people in the area you plan to invest in. 

Best of luck and happy hunting!

@Peter C.   Welcome to BP!

Everything you said about Santa Cruz mountain living rings very true! My husband and I are about 20 min from Felton, up in the mountains. Also remodeling our house and learning a lot. Big change from city living and a nice day trip for our friends to come visit :) 

I liked reading Cashflow Quadrant by Robert Kiyosaki. 

Good luck! 

@Justin Bocchino  Hello from a fellow Los Gatos BP member!  

I would say don't give up on CA. This discussion thread may provide food for thought. There are also interesting discussions about 30k pigs, if you have not heard that term. My suggestion would be to connect with local investors for the area you choose to invest in (in or out of state) and learn about the area/city as much as you can before investing. 

I only have one rental condo -- edge of SF on the border with Daly City. Was a primary home. Bought during downturn in 2009. No rent control. I knew that I didn't want to self-manage so found a management co. Good tenants over the last 2+ years. Had tenant change over last September - zero days vacancy, zero touch ups/repairs. Can sell it at a nice tax free gain (under primary home exclusion) but I want to stay in SF market. That said, it will be a while til I can buy a second rental in the same complex, SF or around but I'm willing to wait, look around and learn. Prices will come down eventually and it's nice to make money in your sleep :)

Good luck!

 @Leslie B.  - found this article on BP about LLCs. Something else to consider is that once you form a LLC in CA, you need to file a tax return and pay $800 minimum tax for it every year until dissolved. This applies even if LLC is just a shell and does not conduct any business or owns any real estate.

@Leslie B. 

Hi Leslie and welcome to BP! Common strategies to take advantage of first-time buyer perks are  to invest in a duplex and live in one unit or house hack - buy as primary, fix up and rent out.  I don't know about buying rentals outside SF first while still preserving your first-time buyer privileges for later primary home purchase.

I own and rent out a condo in sf. Bought it as primary home in 2009 when prices were dropping and foreclosures were everywhere. Over the last 2 years it's been a no-hassle rental. I hired a management co and that has worked well. What has allowed me to buy it, was having a stable job and saving money for downpayment. I was ready to buy when market went downhill. Real estate is cyclical so there are bound to be downturns in the future. 

Good luck! 

@Sam Thompson

1. if your depreciation is limited to 4K, then you will recapture 4K for 2015. IRS will not require you to use more depreciation than you were allowed to take.

2. if home is converted to second home and is no longer a rental, you will not be required to use 10K depreciation. You will use only what you were allowed to deduct for the 2016 if the conversion happened mid-year. If house was second home for entire year, then no depreciation to recapture for that year. 

Hope this helps.

@Christopher Adams - very nice location and hope the deal works out for you!

A few thoughts that came to mind. Since you will be looking for specific tenants and in a higher rent price point, it may take longer than you expect to get the place rented out. Have you done any research on how fast condos in this building are getting rented or what to put into the place to attract the tenants you want?  I rent out a 1br by daly city bart station and recently had a tenant change over. No problem finding new tenants, but rent is half of yours. 

I assume this condo comes with a parking space?

Renovation timeline -- three weeks. I'm not sure how extensive your kitchen and bathroom reno will be, but three weeks may be too optimistic. I think I heard somewhere -- whatever you think it will take, double it.  

Mortgage -- is this 3.9% 30-year fixed? If it's investment property loan, 3.9% maybe a bit too low. However, if you're banking on refi down the road, ARM maybe a better option?

Maybe @Amit M. can provide you some input?

Here's what my PM recently added to the contract to address IRS withholding.  By the same token, 7% FTB withholding will be from gross rents. Here's  a link to more info --FTB Decision Chart

Hope this helps.

If Owner is a Foreign Investor (i.e., a nonresident alien individual, a foreign entity,
or other non-U.S. person), Owner authorizes Broker to withhold and transmit to the
Internal Revenue Service thirty percent (30%) of the GROSS rental receipts unless
Owner elects to treat rental income as