All Forum Posts by: Anthony T.
Anthony T. has started 2 posts and replied 9 times.
Post: Changing Joint Ownership on Investment Property
- Rental Property Investor
- Bay Area, CA
- Posts 9
- Votes 4
Quote from @Jason Zundel:
Hey Anthony, you are correct (under rule 462.040 in CA) that so long as the original transferors stay on title with the same percentage ownerships, then converting from joint tenancy to a tenancy in common will not be considered a taxable transfer. CA being CA though, the slightest mistake will cause you problems, now or later on down the line. Unless you are pretty comfortable with filing forms of this nature, I might recommend getting some help. Doesn't have to be an attorney though, as a good title company could likely help you with this for much cheaper than a real estate attorney in CA.
Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.
Thanks for the feedback Jason. Appreciate it.
Post: Changing Joint Ownership on Investment Property
- Rental Property Investor
- Bay Area, CA
- Posts 9
- Votes 4
My brother and I own an investment property in California in our names (we also both reside in California).
On the deed we are listed as Joint Tenants and we are looking to update it to Tenancy in Common.
Two questions:
- Is this going to trigger some sort of taxable event? My research says no but there may be other steps we need to take I am not aware of.
- Is this something we can do ourselves or do we have to get the help of a real estate attorney?
Thank you!
Post: If This Were Your Property — How Would You Make It Pay Off?
- Rental Property Investor
- Bay Area, CA
- Posts 9
- Votes 4
Quote from @Account Closed:
Quote from @Anthony T.:
Hi BP Community!
Long time lurker, first time poster. I’ve appreciated the information this community has shared and hope to tap into the knowledge base to get guidance on leveraging our existing property.
My brother and I own a multifamily rental property that our father transferred to us in 2021. Because he transferred it to us, we are subject to potential capital gains.
Property is 4 units (duplex, house, cottage) with a remaining mortgage of $390K at a great rate (3.5% / 30yr fixed). Property appraised for $2.7M in 2021. Before taking over, our father had kept rents below market in favor of keeping long term tenants. We generate solid cash flow and our cap rate based on FMV is <3%. Property is in ok shape - built before 1990. The duplex and house are decent but I'm worried the cottage may require investment in the near future.
We both live in California, the property is in our name as joint owners. Our experience in real estate has been managing this property ourselves. The property is in Silicon Valley close to tech companies and is in a prime location where there is strong housing demand.
We're exploring the best ways to leverage our property and are especially focused on opportunities that can generate wealth and a one-time ROI. That said, we're also interested in hearing creative ideas—especially if they could provide strong, sustainable cash flow over the long term.
Here are some of scenarios we’ve been contemplating:
Option 1: Develop the land and build 6 (or more) multifamily units. I'm thinking of townhomes 3BR/3Ba ~1500 sqft. We're zoned for that many units at a minimum as I have spoken to the city. I have seen lots of similar size and zoning develop projects like this. We realize this would be a huge undertaking and we would need to bring in a lot of expertise to help lead development. I have spoken to a couple of lenders and it seems our biggest challenge would be bringing ~20% of construction costs to the table as capital. Broad strokes, I believe this scenario has the biggest ROI potential from one project however this will come with big challenges including capital, expertise, and risk.
Option 2: Pursue the same as Option 1 but just entitle the land and sell it / reinvest.
Option 3: Explore subdividing the lot and build individual SFRs? I am not sure about zoning restrictions for something like this. My understanding is SFR construction is less expensive. Would this be any different from Option 1? I am not sure what our financing options are for this scenario.
Option 4: Leverage the equity via HELOC/cash out refi for further real estate investment. I believe we have a lot of leverage here so we could grow the portfolio significantly. I've read about DSCR options and feel like we could easily qualify and bring capital to reinvest elsewhere.
Option 5: Same as Option 4 but house hack a multifamily property for my brother to live in as a primary residence.
I’d love to hear your thoughts on the different ways we could approach this. If anyone is open to connecting, I’d appreciate the chance to talk it through. We don’t feel we are leveraging our situation to its maximum and with so many options, it’s been overwhelming. It would be helpful to get a reality check on what makes the most sense so we can narrow in on a strategy.
Why not subdivide the land first, see how interest rates and the economy plan out and then you can either sell or build.
You can also sell the property into a 1031. With the gains of the 1031, you can then split the funds equally into two (or more parcels). So, with that done, you defer the taxes until you realize the gains at a later date. Of course, when you want to sell again, you can 1031 into another property after that. I've heard people 1031ing properties until they pass on, and then the tax due is priced at a step-up cost basis.
The Bay Area in Cali is just going to go up and up, so you really cannot lose in any situation, unless you over-leverage yourselves.
Thanks Mike,
Just so I understand your feedback, I assume this would only be done once we have a clear vision of what our end project would be correct? You wouldn't invest the soft costs without knowing what you're building.
Post: If This Were Your Property — How Would You Make It Pay Off?
- Rental Property Investor
- Bay Area, CA
- Posts 9
- Votes 4
Quote from @Aaron Zimmerman:
i just want to make sure the property was transferred and not transferred upon death with a step up in basis. If no, see below. If yes, ignore the below.
On the capital gains piece, the property should have a stepped up basis upon death. If this didn't occur, you will want to talk with a CPA ASAP to step up the value of the building. For example, let's say your fathers basis is $500k and the FMV is $2.7M, then your new value should be $2.7M. This really makes an impact upon sale.
Hi Aaron, yes - the property was just transferred (not upon death). Understood on any potential sale impact. Thanks for the feedback!
Post: If This Were Your Property — How Would You Make It Pay Off?
- Rental Property Investor
- Bay Area, CA
- Posts 9
- Votes 4
Quote from @Dan H.:
Quote from @Anthony T.:
Hi BP Community!
Long time lurker, first time poster. I’ve appreciated the information this community has shared and hope to tap into the knowledge base to get guidance on leveraging our existing property.
My brother and I own a multifamily rental property that our father transferred to us in 2021. Because he transferred it to us, we are subject to potential capital gains.
Property is 4 units (duplex, house, cottage) with a remaining mortgage of $390K at a great rate (3.5% / 30yr fixed). Property appraised for $2.7M in 2021. Before taking over, our father had kept rents below market in favor of keeping long term tenants. We generate solid cash flow and our cap rate based on FMV is <3%. Property is in ok shape - built before 1990. The duplex and house are decent but I'm worried the cottage may require investment in the near future.
We both live in California, the property is in our name as joint owners. Our experience in real estate has been managing this property ourselves. The property is in Silicon Valley close to tech companies and is in a prime location where there is strong housing demand.
We're exploring the best ways to leverage our property and are especially focused on opportunities that can generate wealth and a one-time ROI. That said, we're also interested in hearing creative ideas—especially if they could provide strong, sustainable cash flow over the long term.
Here are some of scenarios we’ve been contemplating:
Option 1: Develop the land and build 6 (or more) multifamily units. I'm thinking of townhomes 3BR/3Ba ~1500 sqft. We're zoned for that many units at a minimum as I have spoken to the city. I have seen lots of similar size and zoning develop projects like this. We realize this would be a huge undertaking and we would need to bring in a lot of expertise to help lead development. I have spoken to a couple of lenders and it seems our biggest challenge would be bringing ~20% of construction costs to the table as capital. Broad strokes, I believe this scenario has the biggest ROI potential from one project however this will come with big challenges including capital, expertise, and risk.
Option 2: Pursue the same as Option 1 but just entitle the land and sell it / reinvest.
Option 3: Explore subdividing the lot and build individual SFRs? I am not sure about zoning restrictions for something like this. My understanding is SFR construction is less expensive. Would this be any different from Option 1? I am not sure what our financing options are for this scenario.
Option 4: Leverage the equity via HELOC/cash out refi for further real estate investment. I believe we have a lot of leverage here so we could grow the portfolio significantly. I've read about DSCR options and feel like we could easily qualify and bring capital to reinvest elsewhere.
Option 5: Same as Option 4 but house hack a multifamily property for my brother to live in as a primary residence.
I’d love to hear your thoughts on the different ways we could approach this. If anyone is open to connecting, I’d appreciate the chance to talk it through. We don’t feel we are leveraging our situation to its maximum and with so many options, it’s been overwhelming. It would be helpful to get a reality check on what makes the most sense so we can narrow in on a strategy.
https://www.neighborhoodscout.com/ca/san-jose/real-estate
it does not help your gains tax, but it does imply that you likely have significant equity to leverage in what ever you decide.
i am a big fan of sophisticated value adds. I define sophisticated value adds as primarily knowledge based versus actually doing the work and have the risk of rehabs/development. I once had my value add being a law that was passed the legislation and recognizing what this lawwould do to valuations of certain properties. My first protege sold a property for $1.5m that had current use value below $1m due to a recently changed/resvinded ADU bonus density program (before it was changed). No rehab or development required. This means no risk and little effort.
good luck
Thanks for the insights all. Given the discussion - an understanding of our current FMV via an appraisal will get pushed near the top of the to-do list.
Post: If This Were Your Property — How Would You Make It Pay Off?
- Rental Property Investor
- Bay Area, CA
- Posts 9
- Votes 4
Quote from @Alan F.:
Quote from @Anthony T.:
Quote from @Caleb Brown:
I like option 1. With how much equity you have is there a way to structure where you don't have to bring 20% to the closing table? You have 2M in equity which is quite a bit. If that's not possible then maybe you can do a cash out refi(keep a lower LTV) to further develop the lot. If you do develop have a super solid team. I would interview and meet before deciding which avenue so you can know what's the most feasible path to go. Either way you have a great property with so much equity, take small steps
For those experienced in developing and building multifamily, would be interested in hearing thoughts on the best path to pursue here. Are developers willing to have informal conversations with individual property owners about potential development? I've found a few of the ones who have worked on comps locally and was thinking about reaching out directly.
#1, definitely speak with the developer/contractor next door.
Thanks! Found the developer - will see if I can get in touch with them!
Post: If This Were Your Property — How Would You Make It Pay Off?
- Rental Property Investor
- Bay Area, CA
- Posts 9
- Votes 4
Quote from @Lateefah Mathews:
@Anthony T. Glad you took the plunge and posted, we all pretty much start out as lurkers, Lol! Now for your question, first off, I’d get an updated valuation because your 2021 appraisal is stale. The market and economy have shifted since then, so your true equity position could be higher or lower than you think. Second, I’d look into a 1031 exchange. Sell and roll into multiple cash-flowing properties in other markets, or even a larger, multifamily or mixed-use building. This will let you defer capital gains, potentially increase total units owned, and target stronger cap rates outside Silicon Valley.
Should you decide to keep the property, I like the cash-out refi plan over a HELOC. It's a easier way to tap into your equity and reinvest into multifamily, either in-state or out-of-state, while still keeping this prime property in your portfolio.
Thank you @Lateefah Mathews!
We were just talking about getting an appraisal to understand our baseline! Thank you for the feedback - we will likely look into this.
Question re: cash out ref vs. HELOC - What do you like the former over the other? We are far from doing diligence around reinvestment and I would think have access to the LOC would provide flexibility as opposed to carrying the debt on the full refi.
Post: If This Were Your Property — How Would You Make It Pay Off?
- Rental Property Investor
- Bay Area, CA
- Posts 9
- Votes 4
Quote from @Caleb Brown:
I like option 1. With how much equity you have is there a way to structure where you don't have to bring 20% to the closing table? You have 2M in equity which is quite a bit. If that's not possible then maybe you can do a cash out refi(keep a lower LTV) to further develop the lot. If you do develop have a super solid team. I would interview and meet before deciding which avenue so you can know what's the most feasible path to go. Either way you have a great property with so much equity, take small steps
For those experienced in developing and building multifamily, would be interested in hearing thoughts on the best path to pursue here. Are developers willing to have informal conversations with individual property owners about potential development? I've found a few of the ones who have worked on comps locally and was thinking about reaching out directly.
Post: If This Were Your Property — How Would You Make It Pay Off?
- Rental Property Investor
- Bay Area, CA
- Posts 9
- Votes 4
Hi BP Community!
Long time lurker, first time poster. I’ve appreciated the information this community has shared and hope to tap into the knowledge base to get guidance on leveraging our existing property.
My brother and I own a multifamily rental property that our father transferred to us in 2021. Because he transferred it to us, we are subject to potential capital gains.
Property is 4 units (duplex, house, cottage) with a remaining mortgage of $390K at a great rate (3.5% / 30yr fixed). Property appraised for $2.7M in 2021. Before taking over, our father had kept rents below market in favor of keeping long term tenants. We generate solid cash flow and our cap rate based on FMV is <3%. Property is in ok shape - built before 1990. The duplex and house are decent but I'm worried the cottage may require investment in the near future.
We both live in California, the property is in our name as joint owners. Our experience in real estate has been managing this property ourselves. The property is in Silicon Valley close to tech companies and is in a prime location where there is strong housing demand.
We're exploring the best ways to leverage our property and are especially focused on opportunities that can generate wealth and a one-time ROI. That said, we're also interested in hearing creative ideas—especially if they could provide strong, sustainable cash flow over the long term.
Here are some of scenarios we’ve been contemplating:
Option 1: Develop the land and build 6 (or more) multifamily units. I'm thinking of townhomes 3BR/3Ba ~1500 sqft. We're zoned for that many units at a minimum as I have spoken to the city. I have seen lots of similar size and zoning develop projects like this. We realize this would be a huge undertaking and we would need to bring in a lot of expertise to help lead development. I have spoken to a couple of lenders and it seems our biggest challenge would be bringing ~20% of construction costs to the table as capital. Broad strokes, I believe this scenario has the biggest ROI potential from one project however this will come with big challenges including capital, expertise, and risk.
Option 2: Pursue the same as Option 1 but just entitle the land and sell it / reinvest.
Option 3: Explore subdividing the lot and build individual SFRs? I am not sure about zoning restrictions for something like this. My understanding is SFR construction is less expensive. Would this be any different from Option 1? I am not sure what our financing options are for this scenario.
Option 4: Leverage the equity via HELOC/cash out refi for further real estate investment. I believe we have a lot of leverage here so we could grow the portfolio significantly. I've read about DSCR options and feel like we could easily qualify and bring capital to reinvest elsewhere.
Option 5: Same as Option 4 but house hack a multifamily property for my brother to live in as a primary residence.
I’d love to hear your thoughts on the different ways we could approach this. If anyone is open to connecting, I’d appreciate the chance to talk it through. We don’t feel we are leveraging our situation to its maximum and with so many options, it’s been overwhelming. It would be helpful to get a reality check on what makes the most sense so we can narrow in on a strategy.