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(former)FormerSanDiegan
ParticipantTo beat a dead horse, I thought for some folks it would be interesting and intellectually stimulating to see the MAY numbers for the areas that the late latesummer2008 picked to illustrate that the OC was whacked and declining by 20-50% in APril YOY.
YOY numbers for May.
Newport Beach 92661 +32.3%
Laguna Beach 92651 -15.3%
Corona del Mar 92625 -6.7%
Capistrano Beach 92624 +167.5%
Trabuco Canyon 92679 +16.4%
Yorba Linda 92887 +4.6%So, you see, following the logic of the original post, one might conclude that these areas mostly rebounded tremendously in May. And even the two areas with declines in May were off less than any one area in April. Using that logic would be flawed, however.
Conclusion: The original post was either a pea-brained conclusion based on myopic vision of specific areas of the OC … or sensationalism based on cherry-picked, extremely noisy, monthly zip-code specific numbers.
ParticipantTo beat a dead horse, I thought for some folks it would be interesting and intellectually stimulating to see the MAY numbers for the areas that the late latesummer2008 picked to illustrate that the OC was whacked and declining by 20-50% in APril YOY.
YOY numbers for May.
Newport Beach 92661 +32.3%
Laguna Beach 92651 -15.3%
Corona del Mar 92625 -6.7%
Capistrano Beach 92624 +167.5%
Trabuco Canyon 92679 +16.4%
Yorba Linda 92887 +4.6%So, you see, following the logic of the original post, one might conclude that these areas mostly rebounded tremendously in May. And even the two areas with declines in May were off less than any one area in April. Using that logic would be flawed, however.
Conclusion: The original post was either a pea-brained conclusion based on myopic vision of specific areas of the OC … or sensationalism based on cherry-picked, extremely noisy, monthly zip-code specific numbers.
ParticipantNo responses ?
Maybe this is why they are going out of business.
ParticipantNo responses ?
Maybe this is why they are going out of business.
Participantscruffydog –
What is your goal ?
If it is to take your real estate profits to avoid losses, the 2-year personal use might eat up the taxes you seek to avoid.
It might be a wash between paying 25% now in taxes versus taking a 25% loss over the 2 years you need to occupy the rental property. Evaluating this trade requires a crystal ball, however.Participantscruffydog –
What is your goal ?
If it is to take your real estate profits to avoid losses, the 2-year personal use might eat up the taxes you seek to avoid.
It might be a wash between paying 25% now in taxes versus taking a 25% loss over the 2 years you need to occupy the rental property. Evaluating this trade requires a crystal ball, however.ParticipantEl Jefe -Thanks for clarifying.
ParticipantEl Jefe -Thanks for clarifying.
ParticipantI actually sold my house in 2005 using a price range. WIth Century 21, Not Prudential. Here is why we did it:
In spring of 2005 in my neighborhood there were so few homes on the market that there were large gaping holes in price ranges. In our case, there was maybe one house priced between 600K and 900K. We thought ours was worth 8xx K.
We priced it from the 770K to 850K (or something like that). It sold in the 820’s.
In our case, it was because we really did not know with more than 10% precision what it should sell for.These days, in most areas, there is more than enough inventory to compare pricing relative to the competition. So it makes less sense than in the heady 2004-2005 days.
ParticipantI actually sold my house in 2005 using a price range. WIth Century 21, Not Prudential. Here is why we did it:
In spring of 2005 in my neighborhood there were so few homes on the market that there were large gaping holes in price ranges. In our case, there was maybe one house priced between 600K and 900K. We thought ours was worth 8xx K.
We priced it from the 770K to 850K (or something like that). It sold in the 820’s.
In our case, it was because we really did not know with more than 10% precision what it should sell for.These days, in most areas, there is more than enough inventory to compare pricing relative to the competition. So it makes less sense than in the heady 2004-2005 days.
ParticipantConsidering Option #1 …
Once you figure out your potential tax liability if the property is sold here is the calculation I would do:
Let’s assume for simplicity that your cost to sell outright is 5% in commissions/costs of sale, plus a tax liability of about 25% (Fed=15%, state =9.3%, depreciation recapture is 25%).
point to ponder …
1. What is the current income produced from the property after accounting for any maintenance, vacancies, prop management, and repairs ?
2. How much income can you generate from the remaining cash left after your sale.
Example:
Let’s say you net about 35,000 annually from these properties.
If you bought in ancient history your tax basis would be low. So let’s say you would net from sale 1M, minus 50K expenses/commissions, minus 250K in taxes. That leaves you with 700K. In this example, to get the same 35K annually, you would have to net about 5% from your investments. Money market/CD territory will beat that.
If you are netting 50K annually, then it would take over 7% to replace the rental income and it gets more difficult to replace that income with a conservative investment.
Plug in your numbers and see if this option makes sense … or not.Then, compare it to owning say 930K (after commissions and 1031 fees) of property in another less-bubbly area.
Or, if you really hate taxes, try option #5: DOnate it to charity. It will save you tons on taxes.
ParticipantConsidering Option #1 …
Once you figure out your potential tax liability if the property is sold here is the calculation I would do:
Let’s assume for simplicity that your cost to sell outright is 5% in commissions/costs of sale, plus a tax liability of about 25% (Fed=15%, state =9.3%, depreciation recapture is 25%).
point to ponder …
1. What is the current income produced from the property after accounting for any maintenance, vacancies, prop management, and repairs ?
2. How much income can you generate from the remaining cash left after your sale.
Example:
Let’s say you net about 35,000 annually from these properties.
If you bought in ancient history your tax basis would be low. So let’s say you would net from sale 1M, minus 50K expenses/commissions, minus 250K in taxes. That leaves you with 700K. In this example, to get the same 35K annually, you would have to net about 5% from your investments. Money market/CD territory will beat that.
If you are netting 50K annually, then it would take over 7% to replace the rental income and it gets more difficult to replace that income with a conservative investment.
Plug in your numbers and see if this option makes sense … or not.Then, compare it to owning say 930K (after commissions and 1031 fees) of property in another less-bubbly area.
Or, if you really hate taxes, try option #5: DOnate it to charity. It will save you tons on taxes.
ParticipantI disagree with the assessment that Option #2 “doesn’t get rid of anything”.
A 1031 exchange could significantly reduce your downside risk. You could consider 1031 exchange into a less bubble-icious region. San Diego is significantly over-priced compared to say, Kansas City or Nashville.
Option 3 is now out as well. When converting back from rental to owner occupied, you must live there a full 5 yrs to get the write off. 2 of the most recent 5 only goes for owner occupied converted to rental.
I thought you had to OWN the property for 5 years in the case of converting back to rental use. Can you point to the IRS guidance that says you have to OCCUPY it as a personal residence for 5 years. I read Pub 523 for Tax year 2006 and didn’t see the 5-year personal use for the case of converting rental back to residence addressed.
ParticipantI disagree with the assessment that Option #2 “doesn’t get rid of anything”.
A 1031 exchange could significantly reduce your downside risk. You could consider 1031 exchange into a less bubble-icious region. San Diego is significantly over-priced compared to say, Kansas City or Nashville.
Option 3 is now out as well. When converting back from rental to owner occupied, you must live there a full 5 yrs to get the write off. 2 of the most recent 5 only goes for owner occupied converted to rental.
I thought you had to OWN the property for 5 years in the case of converting back to rental use. Can you point to the IRS guidance that says you have to OCCUPY it as a personal residence for 5 years. I read Pub 523 for Tax year 2006 and didn’t see the 5-year personal use for the case of converting rental back to residence addressed.
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