DEAR BOB: What is the best way to change my deed to include my two sons, ages 21 and 26? How do I find a good real estate attorney who won’t overcharge me? –Leonardo R.
DEAR LEONARDO: Why would you want to add your sons to your title? That could be a major mistake.
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If you want to avoid probate after you die, you would be far better off creating a revocable living trust naming your sons to receive the title after you die.
As I often say, “It is usually far better to inherit real estate than to receive it as a pre-death gift.”
If you give your sons a full or partial interest in your property now, you burden them with your probably low adjusted cost basis, thus depriving them of a new “stepped-up basis” to market value as of the date of your death if they instead inherit your property.
Another possible drawback, in many states, is the property may be subject to reassessment for property tax purposes if you give them a partial interest now.
Also, you give up full control of your property in case you need to sell the property to provide cash for your care in the old folk’s home. Please consult your tax adviser and real estate attorney before giving your sons a partial interest in your property.
OCCUPANCY OF JOINTLY OWNED HOME DOESN’T MATTER
DEAR BOB: My brother and I own a house as joint tenants with right of survivorship. However, I alone will be living in the house for two years. If we then sell it, will all the capital gains tax reflect on my Social Security number or his as well? We are both listed on the mortgage and the title –Shahram H.
DEAR SHAHRAM: The fact you will be occupying the house alone for two years has no effect on the title.
When you and your brother sell the house in two years, the capital gain will be divided equally between you since you are equal co-owners. Both Social Security numbers should appear on the IRS Form 1099, which will be prepared by the attorney or title settlement firm handling the closing.
HOW MUCH RENT SHOULD A FOUR-PLEX PRODUCE?
DEAR BOB: I am considering buying a fourplex rental property for $259,000. How much rent should the four units produce to make this investment pay off? –Jason N.
DEAR JASON: The exact answer depends on the amount of your cash down payment and the mortgage payments.
As a very general rule, the total monthly rents should ideally be 1 percent of the property’s market value.
To illustrate, with a $259,000 purchase price (of course, never pay full asking price), the property should produce gross rent of $2,590 per month. However, because rents have not kept pace with rising property values in most cities, don’t be surprised if the attainable rents are not that high.
Check local rents before purchasing the property to see if it will be a profitable investment for you.
The new Robert Bruss special report, “How to Sell Your House or Condo for Top Dollar in a Buyer’s Market,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.
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