All Forum Posts by: Tony Kim

@Nicholas Aiola

Thanks for being such a great reference for us!

I purchased an SFR 8 years ago and lived in it as my primary residence for the first 5 years and rented it out for the past 3 years. If I were to sell now, what portion of my capital gains would be subject to taxation and what portion would be covered under the Section 121 exclusion? Thanks!

So based on this post, it appears you are trying to avoid capital gains taxes associated with the $150K increase in excess of the $250K exemption? If your house has increased in value around 400K and you are in the bay area, I'm guessing your house is well into the 7 figure range. If you deduct closing costs of around 80K, then you're left with around 70K in gains. Have you not made 70K in capital improvements during the time you lived in your home?  Or are you already including cost basis adjustments from capital improvements in your 400k figure? Also, I would MUCH RATHER be liable for the 150K gains than have to resort to converting to a rental and attempting to 1031 later on down the line. Remember, the 1031 only defers capital gains...whereas the primary residence exemption permanently ELIMINATES the capital gain liability. Once you convert to a rental, you've lost the 250K exemption, unless you move back into the property....at which time you'll be able to lower your tax liability slowly, but never eliminate it.

Also, I guess it goes without saying that you are not married?

After spending a lot of time looking at various different QI's, I ended up using Dave Foster. I contacted several of the largest QI providers and none came close to the internal controls they have in place to make sure your funds are safe and secure. After all, probably the single most important thing is the peace of mind that your funds will not be at any risk whatsoever. Dave's company is the only one that truly provided this. Oh, and there's also the fact his knowledge is unmatched when it comes to 1031 exchanges.

Upon the payout of your syndicated deal, you exchanged via 1031 into another syndicated deal? Was this generally performed by the sponsor?

It will show up on your K-1 and your taxable distributions will be lower than the cash you actually received. The sponsor will depreciate the property using the same concept that any direct owner of real estate would and apply those deductions on a ratable basis to the investors. 

@Catherine Underwood

SFR's in Los Angeles are only partially subject to rent control laws. Raising rent on these properties is not subject to the 3% or so annual cap that multi-units are subject to. However, the part of rent control that pertains to asking them to move out when the lease is over still applies. Displacing a tenant against their wishes when their lease is over may cost a significant amount of money, if the tenants know their rights.

Prop 10 would be terrible for all parties involved, IMO...and early indications are that it will not pass. But you can never say never...especially with these polls which are not exactly representative of the voting public (Early polls also indicated a much different result with our presidential elections!). With that said, I'm still in the process of doing a 1031 exchange, selling my SFR for a fourplex in Los Angeles.

Also, if you are still serious about finding a property in Los Angeles, as mentioned by a previous poster, that "ghetto" list is a bit outdated. South Los Angeles is in the process of being gentrified and properties are selling very quickly here. The George Lucas Museum, Coliseum & Exposition Park renovation (preparation for the Olympics), USC's continued investments in the area, LA Ram's stadium, Metro Rail development, and the fact that much the rest of Los Angeles is unaffordable, are all contributing to the development here.

For properties located in primary markets, instead of a dichotomous characterization of a property either cash flowing or not cash flowing, wouldn't it be more appropriate to measure the degree of cash flow? I mean, almost ALL properties will cash flow as long as you put enough money down. I've just put an offer on two multiplex residential properties in Los Angeles that will cash flow very nicely for me.....but I didn't really find a diamond in the rough. I'm just putting down a good amount of money. And as the tenants move out (God only knows when that will be), I'll be able to rehab and bring the rents up to market (as long as Prop 10 doesn't pass). The increase in rent vs. rehab costs is where the true value-add will come in.

With that said, please.....no to Prop 10!!

Deleting this post. Not sure what happened but my post above got added twice.

Wow, a lot of high and mighty responses here. But that's fine... it's more than understandable as we are in a forum that talks about maximizing your dollars, and not wasting them. But it's hilarious to see people getting so nerded up over spending a few dollars on a lottery ticket.

I play maybe once a year (which is about how many times I set foot in a 7-Eleven) or whenever its convenient because it provides a mild level of amusement for a few days. 

On site property manager required when you have 16 or more units. 

I'm currently selling one of my SFRs and attempting to 1031 exchange it into a 4 plex in Los Angeles. I've tried the OOS route and I've even tried the Central California route..... even went into escrow on an apt building but ultimately decided to stay In Los Angeles for various reasons. 

As mentioned by a previous poster, you have to run the numbers and see which makes sense to you because you are asking for advice on a very general scenario....the merits of which will depend on the details and numbers.