Rebecca is a Dziedzic Partner and she is in the Lake Tahoe and Truckee area of California. She specializes in high-end homes, and all things real estate, and she invested in herself with her husband.
She is a Professional real Estate Broker/Realtor specializing in the North Tahoe and Truckee luxury home market. She is an expert in working with investors and spec builders, also those wanting to build their dream home. She is enjoying working with locals and first-time home buyers. Skilled in Negotiation, Online Marketing, Sales, and Transaction Management. With over 20 years of experience in real estate in the Truckee and North Lake area, helping buyers and sellers navigate the challenges of purchasing property in the area.
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Selling High-End Primary Home in Tahoe, CA area and facing HUGE Capital Gains Tax with Rebecca Monson
I’m excited about our next guest. She’s a Dziedzic Partner and she is in the Lake Tahoe and Truckee area of California. She specializes in high-end homes, and all things real estate, and she invested in herself with her husband. She’s here to talk with me a little bit about deferring capital gains taxes and getting some freedom from capital gains taxes for anyone if you’re looking to sell in Truckee, Truckee, or Tahoe area. Please welcome to me, Rebecca Monson. Rebecca. How are you doing?
I’m great, Brett, how are you?
I’m doing fantastic, excited to dive into this topic. For our listeners to get to know you for the first time, who just give them a quik little bit about your background and your focus right now.
I’ve been in the real estate market and the Tahoe Truckee area for over 20 years now, specializing in luxury real estate, primary homes, second homes, doing everything you can, and just love working with sellers to get their homes sold just as quickly as possible these days.
We have all these fires going on right and new challenges with Airbnb laws, limiting new investors and new folks, and a lot of headwinds and challenges with the housing crisis. But, for our listeners who aren’t familiar with what’s going on, maybe give them a snapshot of what you’re seeing right now.
We’re seeing classic county specifically considering putting a moratorium on short-term rental licenses. Existing homes that have short-term rental licenses can renew, but they’ve put a moratorium on new licenses being issued for short-term rentals. That’s put a pretty big dent in the real estate market. We’re just dealing with it as it comes along.
Just to bring that a little more to light here. Essentially, people who are Airbnb now, or it looks like could be grandfathered in, but for they’re putting a moratorium on new investors that are buying properties, or even just selling their own properties and or applying for the Airbnb license, and part of that challenge, Rebecca, and I think we were talking about before the show is the fact that there’s the work, let’s say that blue-collar workers in the area, they’re getting priced out of the market and housing, and then you have developers are developing, three and four-bedroom units, which, typically you’re going to draw a higher price, or more of an investor more of an Airbnb thing, and so you have a lot of people who come and tour the place, but then you have the folks that need to live and work, and so there’s just there’s this challenge, all of this housing crisis, and anything else o
There’s a big gap between what the workforce needs versus what we’re seeing. That’s available inventory, not a lot of inventory. Anything really, in the $500,000 price range or below, there really is a lack of inventory these days. On the higher end side, definitely more opportunity. But that’s not what the workforce needs. The workforce needs one-bedroom and two-bedroom apartments being built, and then those people that are looking at purchasing an investment property, there is that challenge for getting those Airbnb, short-term rental licenses. People that bought six months ago, they’re having a heck of a time trying to get those.
That’s a big challenge, and then from the developer standpoint, they don’t make as much money or they can’t underwrite it and make sense of the numbers of them building one and two-bedroom units. Because, it just doesn’t pencil, so they’re making three fours. It’s a problem. The affordability, so California, if you hear us, how do we make it more streamlined for the developer to create more affordable housing, and how can we make it more attractive for the buyer by having more inventory right so they can choose from some prices that can come down? We’re hoping and praying, and especially with these fires, it just exasperated as this inventory gets gobbled up by fires. We’re seeing some of the largest fires going on right now, and it’s just sad.
It’s sad, and we hope that the development and the California restrictions and streamlining the process isn’t making it more inventory is really what needs to be done. However, that might be done. But we’ll see. All we’re also going to be chatting about freedom from capital gains tax. In fact, deferring capital gains tax on highly appreciated homes, using what’s called a deferred sales trust, not a 1031 Exchange. Rebecca, what’s the biggest challenge you’re seeing with some of the clients that you serve, or some of the folks in, in the Tahoe, Truckee area, incline village area, or they’ve owned the property for a long time, it’s highly appreciated, and they’re looking at capital gains tax on the sale of their primary home, they’re not sure what to do?
They’re struggling, really, with knowing how to deal with those huge capital gains in California, even if you’re selling your primary home, and you’re able to use what’s called the 121 exclusion, and if you’re married, you got that $500,000 exclusion, but with the market the way it is, how the prices have just skyrocketed, suddenly, there’s, you have a million or two million or $3 million in equity in your home, and if you’re looking at then wanting to sell it, those capital gains tax can be huge. It could be 35 to 40% of your equity in that home. Then, people are not wanting to do a 1031 Exchange, because they don’t necessarily want to buy another rental property. There are some big challenges, and I think deferred sales, trash is probably the best option for them at this point.
We’re seeing, we closed about 70 of these deals in the past 40 days, and we’ll close out about another seven in the next 40 days, and one deal where that comes to mind is for a client of mine, she’s in her 70s, and she had owned this property for over 25 years, and it was and if you were in Santa Cruz, but it’s a place called aptose, just south of Santa Cruz, and first, it was a primary home for the family, and the kids all got older moved away, and then it became an Airbnb rental. She’s the owner, and it’s done fabulous. In fact, she bought it for around 985,000, and it basically fully depreciated, and then it was being sold for about $8 million. You had this huge gain, and then not a clear plan for how to defer the tax, or like what she said, not wanting to go into more toilets, more trash, more liability, but wanting to be able to retire to diversify to pay off debt, she had a couple of million dollars of debt on the property. She’s very skeptical because she’s only done 1030 ones all her life. She hasn’t heard of this thing called Deferred Sales Trust.
By the way, it’s not a Delaware Statutory Trust, and so she has a really smart son, who’s a financial adviser. He’s been in history for a very long time. She has him call me and our team and we go through this whole thing and his CPA, and I mean, really a couple of months of solid due diligence, and they found that this is 100% legal. It all works. But the biggest thing that solved what the family was looking for, which was not overpaying for a tent or their own property, was not having more toilets, more trash, more liability, more debt. In other words, preserving their wealth and putting themselves in a position for the family to pass the wealth on, and not have as much risk during her older years. That was the outcome really great, and then we added another one for a primary home, and this is where folks go, wait and don’t attend every one that works for a primary like you’re right.
1031 does not work for a primary. But a deferred sales trust does work for a primary residence, and he had lived there for over 15 years, and the property it was in Palo Alto, Silicon Valley, appreciated it to around 8 million and had a big gain, and for him, he was looking for a way to defer the tax and not be caught with, not being able to sell, and so those are examples of how the Deferred Sales Trust works, by the way. You can reach out to Rebecca if you’re watching this right now, especially if you’re going to be selling anything in the Truckee Tahoe area to learn more about that. That’s RebeccaMonson.com, RebeccaMonson.com. Rebecca, I know you have a story to have you even yourself, right that comes to mind for your husband who is selling. Why don’t you tell us your story and the struggles that you went through there.
My husband’s a builder and so we typically build homes, and live in them for two years to take advantage of the 121 exclusions, and then, so far, we haven’t had more than 500,000 in capital gains. We did that last year in 2020 and then moved into the next home, and because of the way that the markets have just been gangbusters, we moved into that home and thought we should let’s take advantage of it. We went to sell and since we hadn’t lived in the home for the last five years, we had over a million dollars in equity in the home, sold it, and basically, had to pay 350 for it. $1,000 in capital gains, and we wanted to be able to use the money again. Since it was a primary home, we couldn’t do a 1031 Exchange, wanted to buy another lot, build another house. Lost a third of that gain to the government.
It’s gone right, and think about this, we can now defer it, and not pay tax. But another thing you just said there, you could have used it to build another house, which, by the way, the housing crisis, that’s exactly what we want to do, we want to unlock the capital, to build more houses for more people, and so it’s really a win-win for the IRS, for your family. For the person who’s looking to buy another piece of property, and this is what these, 401K’s, IRAs, 1031 Exchange, Deferred Sales Trust, this is what they do. They give us the IRS gives us these codes, IRS tax codes are really Congress, and the IRS, enforces them to incentivize us to do what they want us to do, which is create more housing, invest more in the economy, create more jobs, create more tax revenue, and yet, that’s where $50,000 has now been paid to tax, and it’s guess what, you and your husband aren’t building another place or maybe you’re not building another unit because of that. We could have built more.
That’s bringing that full circle to understand that folks, you can buy and sell an investment, real estate with the trust all tax-deferred, you can also invest in stocks, bonds, mutual funds, the client in Santa Cruz, and as well as in Palo Alto, they’re not developers, and they don’t want to be owning active real estate. Like they’re tired of that, they’ve done that for all their lives, and for them. The Stock Market is a great place, for that, because deferring the tax is completely passive. It’s in some of the biggest companies in the world. The flexibility of the Deferred Sales Trust is great. Any thoughts on that, Rebecca?
I know exactly what you’re saying. We are still developing, but we now have to borrow some more money, where we could have been able to, to definitely fully fund it ourselves, and definitely being able to diversify, that money would have been a great option too. Completely agree with everything you’ve said.
For our listeners, again, if you want to learn more, you can go and reach out to Rebecca rebeccamonson.com, and then we can set up a time for all of us to chat if you’re considering selling again in cryptocurrency or primary home, investment, real estate or business, all of the above. We’re here to help you out clarify the Deferred Sales Trust is a good fit for you. Rebecca and I are going to be back probably next week or the week after that sharing more, and so look for more episodes to come in the future, and we still appreciate everyone’s time today, and we wish you well by now.
About Rebecca Monson
Rebecca Monson remembers when she chose to make her home in the Truckee area. As a very logical person who has always valued education and learning, but this savvy businesswoman will tell you, like so many others who are proud to call this area home, Rebecca’s major reason for choosing to live here is that this beautiful, natural location touched her heart-and continues to do so.
A master of the art of the “long-distance transaction,” Rebecca utilizes the Internet e-mail, overnight couriers, digital signatures, social media and a powerful database of contacts for sellers and buyers who must conduct their transaction from many miles away. Her long-distance clients particularly appreciate her ability to keep the process running smoothly while consistently updating them on the progress of their transactions.
In 2012 Rebecca took a step away from real estate to pursue other opportunities. She worked as a Private Mortgage Banker for one of the nation’s largest banks gaining and in depth knowledge about the residential mortgage industry that very few realtors bring to the table. In addition, Rebecca spent the past 2 years working as the Chief Operations Officer for a start-up based in the Truckee area. This online start up business allowed Rebecca to gain top notch tech skills.