All Forum Posts by: Frank Jiang

In addition to the 2/5 year requirement, you are only excepted from capital gains for the portion of the house that you live in.  Since you rented out the other half, you have to pay capital gains tax on that portion regardless of how long you have lived there.

There is also a taxation component in San Diego.  There is a transient occupancy tax and it's currently unclear if that liability is being paid.

It would be very unfortunate if the city sent you a bill for revenue that your tenant is generating.

Doh, assumed you were in CA because your profile says you're from Walnut Creek.  While a pay or quit isn't necessary to start eviction, I would still provide them one which spells out how much they owe in total rent and late fees.  The idea here is to use it as a tool to communicate with your tenant as opposed to actually needing it in eviction proceedings.

First, you will still begin the eviction process.  You will provide the tenant with a dated 'Pay or Quit' notice.  This basically says if the tenant does not pay rent within 'X' days, the landlord will begin the eviction process.  In CA, this is at standard 3 days.

What I would do in your situation is give them this pay or quit notice and word it so that the due date of payment before the beginning of eviction procedures falls on the date that your tenant has promised to pay you.  Then, I would very gently tell the tenant that this paper is just a formality and that nothing will even happen if they pay rent as promised on the day they promised.  Explain to them that CA law means this letter would have been 3 days but you are extending this grace period to them as a courtesy just this once.

This shows you are:

1) Not heartless

2) Strict with your lease

3) Not an idiot

It also allows you to begin real eviction proceedings immediately if this guy is a deadbeat.

As others have stated, you must also enforce clauses on your lease relating to late fees, etc.  If they try to pay you less late fees, decline that payment.

Can all the anti-debt fanatics explain why on earth you would pay 180K when that loan balance becomes 0 after 7 years? Literally paying 75,600 to remove 180,000 of debt over 7 years. IRR on that decision is 28%, as good as some of the best ventures people could hope for.

Even after that, your investment return covers the cost of your debt.  You would be giving up a 10% return asset to pay off a 7% liability, losing 3% return on your assets.

Make financial decisions with your head and math, not from anti-debt mantras.  Making decisions based on general statements like "debt is bad!" is lazy thinking and wealth destroying.

Your multifam generates more income than the loan.  You have 2K per month = 24K per year cashflow on 250K equity, giving you a return of ~10% (gorilla math).  If you sell the multifam, you are essentially giving up 10% - 7% = 3% spread in return for reducing your liquidity and leverage risk.

All of this assumes that the loan forgiveness program is halted.

I would honestly hold out and go for the loan forgiveness in 7 years.  Even with changes, the government typically allows grandfathering.

I would spend more time researching taxation on the 250K, you likely will have much less than 70K in savings for another duplex

You could also look into refinancing/getting a heloc on the multifamily and paying off your loan immediately

As stated by others, the 2nd bank could pull your line of credit, not allowing you to further draw on your HELOC more than you already have. Otherwise, it only matters when you sell your house.

If you sell your home when your home value does not cover the loans on the house, you either have to bring money to the table or you short sell the house (the bank agrees to forgive part of the debt). Typically, the HELOC will take the loss. Short selling does have an impact on your credit score.

This will usually happen if multiple things go wrong (long-term loss of tenant + job loss). Most people can simply hold the rental and not sell during a downturn as long as their rent can cover the mortgage + HELOC. Buy low sell high still applies to real estate.

Nothing, in particular, happens to your mortgages, but you will now have to pay:

1) Your mortgage on your original home

2) Your payment on your HELOC (can be either fixed or floating rate)

3) Your mortgage on the second home

Many people run into liquidity issues if something happens (loss of a tenant, medical emergency, loss of job) and can't afford to pay all of these. Also, your home may be worth less than the mortgage (or the mortgage + HELOC). It's not that something happened to your mortgage, it's that the asset tied to the mortgage is no longer worth the balance of the debt.

I lived in Linda Vista for 4 years.  I love the neighborhood.  It gets "worse" as you get closer to the 805 freeway (where mesa is) but in general, it is a safe, diverse neighborhood.  It's also one of the few nice neighborhoods in SD where you can affordably buy duplexes or properties that are zoned for multiplexes.

That's a big zip code.  Some areas have always been nice (next to Balboa park), some are gentrifying quite nicely while others are still quite rough.

Can you give a better approximate location of the property?  North or south of 94, east or west of 15/805?