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All Forum Posts by: Steve Hungerford

Steve Hungerford has started 9 posts and replied 56 times.

I have an old (1930) house, it has Residential multifamily 6 zoning. That means every 6,000 square feet only one multifamily unit. Since the lot is 10,555 square feet there is nothing more than one unit allowed under the multifamily zoning. If I had Residential zoning because of SB-9 more could be allowed on the lot, plus a lot split. FYI the lot used to be zoned commercial when it was bought. So the county has kind of devalued things in my opinion because of zoning changes.

From the County Website:

If a multifamily or qualifying mixed-use building exists or is planned for this parcel, the following ADU's are allowed: Detached ADU's: At least one and up to two detached ADUs, 800-1200 sf dependent on FAR and lot coverage.

If a single family dwelling exists or is planned for this parcel, an ADU and JADU may be allowed, subject to approval for a non conforming use.

Even though only one unit is allowed and a single family exists it seems we can't do 2 detached ADUs like what would be allowed with a multifamily building ? I guess that would be one apartment or one condo ? 

If they scrape the house off and put a condo or whatever qualifies as multifamily, could they then put 2 detached ADUs ?

I know a detached ADU plus an JADU could be allowed now but that is not as desirable as the JADU has to be under 500 square feet and attached.

Thanks

Quote from @Erik Browning:

@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. 


 How would they deal with permitting, do they have a contractors license ? I thought we could do it as owner builder or someone with a contractors license needs to get permits ?

Quote from @Erik Browning:

Hi @Vanessa Banh, California is making it very easy for folks to build ADU's in response to the housing crisis, and there are a variety of options on how you choose to proceed.

How do you feel they are making it easy ? I keep hearing this when I check at the county level their are lots of permits, reports, issues with converting, confusion, etc. Most people selling something to do with ADU's say its easy this but its far from easy from what I can tell. It should be much easier as bad as we need housing.

Quote from @Dave Foster:


Sorry but you have the information wrong. Dad is out. Also he buys another primary residence (different money) and keeps prop 19 on that but still does the 1031.

Quote from @Steve Hungerford:

The answer is this: you can be working on the house and it be considered an investment ( of course dad not living there). Therefore 1031 is in play. You can then sell and do the 1031. For prop 19 it just had to be your primary residence WITHIN TWO YEARS of the time of buying the REPLACEMENT PROPERTY. Nowhere does it say at the time of sale of the primary residence you were living there. Prove me wrong ? 


I don't mean sound wrong but this place has very watered down information and really needs to step up the quality of info otherwise why post here ?

 Sorry but you have the information wrong. Dad is out. Also he buys another primary residence (different money) and keeps prop 19 on that but still does the 1031. 

The answer is this: you can be working on the house and it be considered an investment ( of course dad not living there). Therefore 1031 is in play. You can then sell and do the 1031. For prop 19 it just had to be your primary residence WITHIN TWO YEARS of the time of buying the REPLACEMENT PROPERTY. Nowhere does it say at the time of sale of the primary residence you were living there. Prove me wrong ? 


I don't mean sound wrong but this place has very watered down information and really needs to step up the quality of info otherwise why post here ?

Quote from @Kushaal Malde:

You cannot 1031 a primary home. Turn it into a rental and then 1031. You cannot take section 121 exclusion if it is not a primary. 

You will have to pick one path. In CA, 55+ have prop 19 on their side so that's the path for keeping low property tax basis. Or 1031 and defer taxes until death with a step up in cost basis so no taxes. 

You missed the point on everything. You state the obvious about it being a rental for a 1031, pretty obvious. Not trying to take 121, again you missed everything. The answer after research is yes there is a way to keep prop 19 and do a 1031. 

I have conflicting information from the county assessors office and their own published questions and answers page.

I feel the owner does NOT have to be living at the original primary residence at the time of sale. Based on section (3) below they just had to be living there at some point within 2 years of the purchase of the replacement property. The county assessor tells me otherwise, even though I point this out below. 

What are your opinions on this issue in regard to if they have to be living there or not at the time of sale of the original primary residence ?

Question: Does the home that was sold have to be the owner's primary residence at the time of the sale ?

Answer: The home from which the property owner wants to transfer the base year value must have been the owner's primary place of residence as of one of the following: (1) the date of the sale of the original primary residence, (2) the date of disaster that resulted in the substantial damage or destruction of the original primary residence, or (3) within two years of the purchase of the replacement primary residence.

Quote from @Julio Gonzalez:

@Steve Hungerford If your dad is selling his current primary residence to buy a larger primary residence, there are no capital gains assessed on the first $250,000 of profit and wouldn't need/qualify for a 1031 exchange. Are you trying to also have a rental property or just get him into a larger home?

 I am trying any way to avoid Capital gains taxes exceeding well over 250K. The home was bought in 1983 and for very little. A bigger and better house would be great. He also has really low property taxes to consider.

It seems we are boxed in to keeping a very old and dysfunctional house. He needs care too and the house is not ideal for that.

Quote from @Andrew Crinnion:

Hi Steve,

I do not believe it would be possible to leverage both options (deferral of capital gains and retaining property tax basis) because in order to qualify for a 1031 exchange the property must be held for productive use in a trade, business or investment. To quality the property must be owned by the taxpayer for at least 24 months immediately before and after the exchange and in each of the four 12 month periods, the property is rented to another person or persons at a fair rental for 14 days or more. So I believe you would need to rent the current home for 24 months and then complete the 1031 transfer and rent the second home for 24 months. However, in order to transfer your property tax basis the replacement primary residence must be purchased within two years of the sale of the original primary residence – either before or after the sale. 

I am sure there are more technical aspects that would go into both options but on its face it looks like a 1031 requires to hold the home for investment for two years but the transfer of property tax needs to be completed within two years. This article referenced an example of someone who converted a 1031 into a primary residence within 7 months, https://atlas1031.com/blog/hol... however, I couldn't find the case description. (Reesink v. Commissioner, TC Memo 2012-118 (April 23, 2012))

I would focus on avoiding the capital gains tax because that will be a much larger cost than the incremental property taxes on a newly purchased property. Maybe you use the rental from the primary residence to pay/offset the rental of a larger house? 


 The property tax savings is pretty big too, especially when factored over time and can be passed on to different generations.