All Forum Posts by: Katie L.

@Alexander Ho

You also might want to speak with an attorney regarding the implications of taking title as joint tenants versus tenants in common.  In California, joint tenancy has rights of survivorship attached to it and it sounds like you are unrelated parties.  Becomes particularly important if you are not all having equal ownership interests.

You'll want to be careful not to trigger any due-on-sale clauses if you are going to take out a loan individually and then transfer the property into an LLC. Best to figure that out ahead of time.

You will want to weigh the pros and cons of an LLC versus a good insurance policy to lower your risks. The choice is very personal and depends on several factors including your risk tolerance, what other assets each of you may have, the likelihood of tenants or visitors suing you, the general condition of the property, whether you have good property management, your other estate planning that you have in place, etc.

Sounds like you should get with an attorney to discuss your options and protect yourself.

*None of this post creates an attorney-client or CPA-client relationship.  Readers are advised to seek professional advice.

@Benjamin M pitassi I know several CPAs in San Diego. I’ll shoot you a PM.

@Nathan Ku

Welcome!  What area are you looking to buy in?  California or elsewhere?  I have contacts for CPAs and attorneys in San Diego and Los Angeles if you're willing to work with folks down south, shoot me a private message if you want the names and what kinds of services you're looking for if you know.

@Kat N.

Sure you can convert to be an investment property.  You'll have to live elsewhere of course unless you house hack and make it partial personal/partial rental.  You'll want to be sure you have the right kind of loan though - usually owner occupied loans have more favorable rates.  You'll also have to pay income taxes on the rental income that comes in.  You will need to treat it as an investment property if you're claiming it as such.  You can't just claim your personal residence as investment if it's not an investment property.  Also, note there could be depreciation recapture upon the sale of a rental, and you also will likely not qualify (or at least a portion won't qualify) for the exclusion of gain from sale of principal residence under IRC 121.  So not all the benefits are for rental: you'll lose out on at least some of the gain exclusion, you have to pay tax on the rental income at ordinary rates, and you may have depreciation recapture upon sale which is higher rate than regular capital gains taxes, and you'll probably pay more mortgage interest over the life of the loan.

*This post does not create an attorney-client or CPA-client relationship.  Readers are advised to seek professional advice and is not to be relied upon in any way.

@Nicole Pearson

Depends on the situation, how many deals you're doing, your risk tolerance, if you have partners, etc. Yes, the $800 minimum tax is required if you are "doing business" in California. If you create your LLC in another state but you live in California and/or are doing business in California, you will still have to pay the $800 minimum tax.

*This post does not create an attorney-client or CPA-client relationship.  Readers are advised to seek professional advice.

@Kathy L.

Congratulations!

Not enough information to totally know what you mean by "construction cost" if you mean major improvements or smaller repairs.  Also not clear if this is a rental property or your primary residence.  If it's an investment property, major improvements will get added to your basis, so no immediate deduction, but will get subtracted out upon sale which lowers your capital gain eventually upon sale (or increases your loss).  Minor repairs or improvements will be deducted immediately.  If it's your personal residence, only major improvements get added to your basis and current minor repairs are not deductible.  You'll also want to look at which costs from your selling expenses and escrow get added to basis, which get expensed, and which you have to eat (generally the ones having to do with the loan).  Get with a good CPA to discuss as you'll be happy when you sell that you know exactly what your basis is and kept good track of such information as the costs went out rather than trying to recalculate it years from now.

*None of this post creates an attorney-client or CPA-client relationship.  Readers are advised to seek professional advice and not rely on this information in any way.

@ Kristian Peter

The San Diego Probate Court does not provide a list of properties subject to probate to my knowledge.  I believe they publish a list of upcoming cases though in the office at the court that you could perhaps check periodically and get the case numbers and information and then look up the court filings and petitions online, or the name of the attorney in the case.  One of the documents that needs to be filed in a probate is an inventory of assets which would likely be helpful.  I'm not aware of services that will provide information to you, so I will let others comment on that aspect.

*This post does not create an attorney-client or CPA-client relationship and readers are advised to seek professional advice.

@Michele G.

Just some additional food for thought - did you inherit from a parent or grandparent such that exclusions were filed to save the property from reassessment from property taxes when you inherited it? If you sell and instead buy another property, you’ll start with fair market value assessment for prop taxes (which if you’re staying in So Cal can have huge effects). I’m sure you’ve heard of Prop 13 rules here in California which usually cause property taxes to increase at a slower pace than fair market value making a lot of homes purchased in CA have a very low property tax basis, which can represent significant savings each year.

Secondly, if you sell, also think of the annual effect on income taxes depending on where you buy next. You’re likely paying CA income taxes each year on the rental income via nonresident return since CA property yields CA source income and I’m sure you’re aware that CA has some of the highest income tax rates in the country. By selling in CA and buying elsewhere, what kind of income taxes do you save year after year?

Just 2 additional factors to throw into the analysis since I’m sure you’ve already considered the large capitals gains taxes you would pay upon sale depending on how long ago you inherited the property and if you received it at a stepped up basis (very likely unless they died in 2010).

If you end up deciding to 1031 the properties and need legal or cpa referrals in Southern California or San Diego, let me know.

*this post does not create an attorney-client or CPA-client relationship. Readers are advised to seek professional advice.

@Ed Lopez

Smart idea.  Always good to cover your bases.  I can give you recommendations in San Diego if you're willing to work remotely.  Send me a message if so.

@Stephen John If you need references for accountants, attorneys, real estate agents, or financial planners, etc. in San Diego, let me know!  Best of luck and welcome to America's Finest City!