All Forum Posts by: Steve Hungerford

@Steve Hungerford I am just here to say when you ask for help and then give smart-*** responses to people that are trying to help you, you come off as a jerk. I’m surprised people are actually trying to help you here. Go talk to a QI

@Steve Hungerford, Unfortunately I think your source or information is incorrect.  There is no $250K exclusion for a 1031 exchange.  There is an exclusion for your primary residence which is found in sec 121 of the IRS code.  This has a $250K exclusion if you meet the requirements and are single.  

For a 1031 exchange which is only available for investment property  you must purchase at least as much as your net sale (contract price minus closing costs) and use all of the net cash to do that (net sale minus mortgage payoff).  You can purchase less than you sell and you can take cash out.  BUT if you do you will pay tax on the difference.

You've been told or you've researched and think that you will not pay tax on your original basis and that is correct.  But when doing a 1031 exchange the IRS chooses to interpret the taking of any cash or purchasing less than you sell as a way of taking profit first.  So you want to take cash and call it basis.   The IRS will make you call it profit and tax it.  Dat's the rules.

If your property was a mixed or split use property.  Or if you still meet the requirements of sec 121 but were now using it as an investment property then there are even other possibilities.

So that is why the fine folks trying to be helpful  are somewhat confused.  I think you've got the two statutes combined in a way that won't work unless there's some more info. And they're just trying to play "stump the dummy" with me  Which was also a favorite game of my kids also.  Unfortunately they frequently beat me.  :). I just try to be the "1031 guy" around here.  It's my business, my passion, and I guess my identity :)

@Ian Murray We would need more details.. Using the 121 exclusion And doing a 1031 implies this was your primary residence which was converted to a rental within the last 3 years. If so, it is doable. If you provide the specifics, timelines, gain, etc, @Dave Foster can give you a detailed answer.

 If you listen to the episode, you will have a better understanding of the 1031 process and what you can/cannot do.  That will help you when you talk to a professional about what you want to do.

The BiggerPockets Real Estate podcast just did an episode on 1031 exchanges.  I recommend listening to it.  It's a bit more complicated than just using the capital gains.  There are price and debt requirements, as well.

@Steve Hungerford it's certainly not handed to you on a silver platter, however there are dedicated consultants at banks here in California that push your plans through the permitting process while also funding the ADU project.

Compared to investing on your own, where you don't have a dedicated consultant, this is very easy. 

I would possibly start by contacting the municipal zoning administrator or staff. Ask them about the re-zoning process. You can find out from them the process, the fees, and whether what you want to do is feasible. Another possible starting point is talking to your real estate attorney. An attorney should be able to help you know what to say and what to ask before you talk to the zoning people.

For valuation, you are talking about value based on a development. So that highly depends on who the intended buyer/user is. For example if you are aiming for multifamily, it might be helpful to get some drawings. Then you can quote costs for drawings. You can present that to lenders for the financing piece. Another approach that works is comparing nearby properties. An appraiser should be able to give you a current appraisal. They should also be able to give a valuation estimate using the new zoning classification. They would carry out the same appraisal procedure, except they would use the new zoning for comparable property and so forth. You could also ask the city tax assessor how they would assess value with new zoning classification. In any case all you can do is estimate I believe. I hope this works out for you.