Did housing burst hit Berkeley? (Redding: sales, real estate, renters)

[Alicia64]

My husband's great aunt just died leaving a huge Berkeley home to him. The house is old and giant and about a mile for UC.

How badly has the housing burst hit Berkeley?

He's trying to decide: sell now or wait? And we both seem to agree that it'll be years before the market starts climbing up. And possibly never again that we'll see such a dramatic bubble.

We're from Redding so don't know what's going on in Berkeley.

Thanks,

Alicia

[ImRandy]

Better areas haven't been as hard hit as less desirable areas. It would sell and probably sell quickly but considering you said, "great aunt" I would think about renting it out. If it's close to UC it will be in high demand. It might be worth holding on to.

[artemis78]

Berkeley's a little wacky, so it probably depends on which direction it is from UC (if it's north or northeast probably it's worth a bundle; south or southeast puts it in the middle of the student zone so it's less desirable real estate; west puts it off of University Avenue, which has taken more of a hit). It also seems to be a tough market for fixers, so if it needs a lot of work I'd consider either doing a renovation first (if you have the finances--will more than pay for itself if you do a nice job, but requires cash upfront) or renting it out. Again, though, it really depends on where it is--and it can be tough and expensive to be a long-distance landlord in Berkeley, so it may not be worth the effort. I'd check recent sales in the area and see what the going rate is, and maybe come check out the place and other nearby homes on the market to see how it compares. Remember if you rent it that you may need to do some repairs and upgrades to get it into rentable shape per Berkeley's policies.

[NorthernCalifornia]

That's quite a property. Berkeley prices are strong and anything that close to the University will be an easy rental.

[Luke9686]

If you live in it for two of the next five years you can avoid paying capital gains taxes. I would talk to an experienced real estate attorney and accountant to see which scenario eliminates the most taxes.

[DMenscha]

You might search for a few real estate agents in Berkeley and find out from the experts what is happening in the neighborhood in which the house is located.

[kettlepot]

Originally Posted by Luke9686

If you live in it for two of the next five years you can avoid paying capital gains taxes. I would talk to an experienced real estate attorney and accountant to see which scenario eliminates the most taxes.

The inheritors will get a stepped up basis from which to calculate their "purchase price" (it will be a 2008 amount, not a 1939 or whatever price). The capital gains will be minimal if they sell now. If they wait and sell later, then your 2 year rule would certainly be a useful thing to do.

Last I heard though, Berkeley has some of the most Radical/Communistic Rent Control laws in the country. If tenants are allowed in, it's entirely possible that they'll be grandfathered in if the building is sold later. That would mean it might become a permanent part of the rental stock and could not be converted back to an owner-occupied house again without going to court. Owner-occupied houses are valued by the Square Foot, Rentals are valued by their income stream. In California, Owner-occupied commands a substantial premium over an identically sized and situated rental. If the OP decides to wait for the next up cycle, it actually might be safer for them to leave the house unoccupied rather than to rent it out. That is one of the pernicious effects of Rent Control laws, and why they are evil.

[artemis78]

In Berkeley, single-family homes are exempt from rent control. Moreover, while Berkeley (and California in general) have many tenant protection laws to prevent displacement, you are always permitted to displace a tenant in a single-family home if the new owner buys it to live there. So I don't think the OP will have any problems on that front.

For what it's worth, it's very possible to have rent control without stringent displacement laws, and to have displacement laws even if your community doesn't have rent control (which dozens of cities have to prevent mass displacement of renters as a result of condo conversion). But they're not one and the same. (The connection tends to made because in a rent-controlled community, a primary reason that a new investor would want to displace current tenants is to raise the rent. But you can always give him the ability to raise the rent but not to displace the tenants--or place a rent ceiling on the unit independent of whether the tenant stays or goes.)

[kettlepot]

Well, it's good to here that the situation in Berkeley has changed. About 10+ years ago, I heard of a situation (second-hand) of an old woman who had a stroke so the kids put her into a convalescent home. Assuming she would never get out, they rented out her home. When in fact she did get better, they wanted to get the renters out and put their mother back into her old home. The case ended up in court as the rent control board took a hard line. Perhaps to prevent this scenario from happening again, the law was changed between then and now.

It would probably be best for the OP to consult a knowledgeable local attorney. The issue is too vital to leave it to assumptions rather than known fact - as I did in my previous post.

[DogLady321]

Originally Posted by Alicia64

He's trying to decide: sell now or wait?

Why wait? I'm assuming you didn't put any money into this house so any profit you make on it will be just that, profit.

However, if you have any interest in the rental market, you will have a steady monthly income from the rent.

I would wonder what sort of taxes you will have to pay on the sale of this house

Sounds like you need to consult with a real estate agent and a real estate attorney and accountant to figure out what will be best for you financially.