SBBN Solution Provider / SBBN Leadership member, Jessica Solomon, interviews local realtor with the interest of converting real estate into assisted living rentals.
Q. How long have you been in Real Estate and what do you do now?
Answer: Since 2008, I have been in commercial real estate. Currently I am the founder and president of Beachside Partners and we focus on Multi-family and residential income properties throughout the South Coast.
Q. What is the number one mistake people make when they must use a property to fund assisted living for a loved one?
Answer: Number one would be: When they assume that selling a home is the only option/solution to fund that level of care that is needed.
Q. When does it make more sense to sell a home vs. rent it out?
Answer: It would make sense to sell if you
· Have an immediate necessity for a large amount cash.
· Urgency for a one-time payment that can’t be taken from existing capital.
· Condition of property has a large amount of deferred maintenance and there is not access to capital for repair, renovation, or remodel.
Q. Do you find yourself telling families to rent their home versus selling their homes?
Answer: Yes, all the time.
Q. What are the unforeseen complications that arise from selling a home too soon? (price, tax implications, market conditions)
Answer: Low tax basis and paying too much in capital gains. Also, not making capital improvements that are relatively easy and will help overall sales price.
Q. If a family decides to rent out a property, but they live afar, how can they successfully manage or coordinate management of the rental from afar?
Answer: I would suggest finding a local market expert. i.e. an experienced reputable contact and identify if they specialize in single family or multi-family rentals.
Q. What is the number one reason someone would or should postpone the sale of a property?
Answer: Tax implications and capital gains.
Q. How has ADUs impacted the local market? How often are ADUs built for additional family members (percentage)?
Answer: The new California statewide laws in 2020 will likely have a drastic effect. This went into effect on January 1. It makes it more feasible to streamline and complete an ADU. An ADU would be more beneficial provided the property owner has favorable finance options or the capital to build.
My guess would that as of 2020 less than 20% of the ADUs in the local Santa Barbara area are built for family members.
Q. What is the best way to evaluate to Sell vs. Rent? What are the top factors to consider?
· Tax Implications
· Property’s overall condition
· Need for cash flow. (Is there an immediate need for cash or funding?)
Q. How are the pros and cons from selling a home or an estate from afar?
Answer: It is crucial to have trusted and experienced professionals. The BIGGEST mistake I see constantly is people hiring or contracting a “friend of a friend.” That’s an okay place to start, but numbers never lie on what success people have in selling certain real estate assets.
Q. What resources do you use to evaluate the costs to transition a primary residence to a rental income property?
· Vendors (General Contractors, painters, flooring installers, etc.,)
· Current Market Analysis/Rental Market
· Vast experience in local market of sales and leasing.
Q. How do you help families assess care costs and leveraging of an estate to fund transition to Assisted Living?
Answer: Santa Barbara is a small local community and that makes it more feasible to connect to the right professional resources. I have partnered with Jessica Solomon on several occasions. Jessica has been a local expert in Senior Care industry since 2004.
Q. What do you recommend to families that need to assess their options from afar or when there are multiple family members planning?
Answer: I recommend finding an experienced individual that understands options. I also believe it is important to ask for a comprehensive and diligent report that reflects all options.
Q. Scenario: Someone needs to be transitioned into a care facility and their main or financial resources are in their property, but the family wants to retain their home. They don’t have the resources to remodel to convert to a rental income property. What are their options?
. Options would be;
· Sales leaseback
· Private lending
· Line of credit (Likely values in Santa Barbara are more expensive and higher risk than traditional lending)
Q. How do responsible parties manage a rental from afar?
· Understand market and type of rental.
· Software for maintenance. (Appfolio, Yardi, etc.,)
· Relationships with local vendors and maintenance professionals.
· Connect with local Property Managers – typically charge and rates are 5-7% of rental price depending on the property
Copyright © 2018. Santa Barbara Business Network. All Right Reserved.