My question involves real estate located in the State of: California
My landlord who lives in one of the two units on the property at which I reside, has offered for me to purchase the property at substantially below market in exchange for him being able to continue to live rent free in his unit for the rest of his life. The house he lives in is in pretty good shape. The house I live in has serious deferred maintenance that needs to be addressed. He does not want to sell the entire property because he does not want to move in his lifetime. He does not want a reverse mortgage because he does not like the idea of a reverse mortgage company being able to foreclose if he ever moves or can't afford his property taxes. He expressed that he has nobody he wants to will the property to because he does not like his family, and that he trusts me and would rather see me have the property and be able to fix up the house I live in.
I am interested in the deal because I would get a property at substantially below market that would one day be able to provide me income (when he passes), would give me immediate equity, and I can afford to get a mortgage to do the extensive work needed to be done to bring up the house I live on to better condition.
I am not sure what price to put on the preliminary change of ownership document for the county because the total "consideration" is cash + free rent. The free rent portion can be calculated by taking his social security predicted death age, subtracting his current age, and then multiplying current market annual rent (plus a CIP adjustment) by the remaining life years. If he has 14 calculated years left, that's a substantial amount of financial exposure to me (and he can obviously outlive the social security life expectancy).
For purposes of this illustration, let's call the total consideration for the sale as $100,000 cash + $400,000 free rent, so I would write $500,000 as the purchase price on the preliminary change of ownership document, if it can be written as $100,000 cash + $400,000 free rent. If the property were being sold on the open market today, it might fetch somewhere between $750-850k, so it's still a good deal for me even if he lives longer than expected. I'm not sure whether to have him do a grant deed with a retained life estate or just do a clean transfer and write a long 30 year lease with $0 rent (with him paying his own utilities), but that's probably a question better left to the tax law forum.
I'd like to have the county use the sale price as the assessed value rather than triggering a reappraisal from them and have them come back to me at an assessed value of $800,000. Any advice on how to have the preliminary change of ownership filled out so that it does not throw up any red flags at the county? It's my understanding that counties in California typically use the sale price as the assessed value unless something on the change of ownership document causes them to question it.
My landlord who lives in one of the two units on the property at which I reside, has offered for me to purchase the property at substantially below market in exchange for him being able to continue to live rent free in his unit for the rest of his life. The house he lives in is in pretty good shape. The house I live in has serious deferred maintenance that needs to be addressed. He does not want to sell the entire property because he does not want to move in his lifetime. He does not want a reverse mortgage because he does not like the idea of a reverse mortgage company being able to foreclose if he ever moves or can't afford his property taxes. He expressed that he has nobody he wants to will the property to because he does not like his family, and that he trusts me and would rather see me have the property and be able to fix up the house I live in.
I am interested in the deal because I would get a property at substantially below market that would one day be able to provide me income (when he passes), would give me immediate equity, and I can afford to get a mortgage to do the extensive work needed to be done to bring up the house I live on to better condition.
I am not sure what price to put on the preliminary change of ownership document for the county because the total "consideration" is cash + free rent. The free rent portion can be calculated by taking his social security predicted death age, subtracting his current age, and then multiplying current market annual rent (plus a CIP adjustment) by the remaining life years. If he has 14 calculated years left, that's a substantial amount of financial exposure to me (and he can obviously outlive the social security life expectancy).
For purposes of this illustration, let's call the total consideration for the sale as $100,000 cash + $400,000 free rent, so I would write $500,000 as the purchase price on the preliminary change of ownership document, if it can be written as $100,000 cash + $400,000 free rent. If the property were being sold on the open market today, it might fetch somewhere between $750-850k, so it's still a good deal for me even if he lives longer than expected. I'm not sure whether to have him do a grant deed with a retained life estate or just do a clean transfer and write a long 30 year lease with $0 rent (with him paying his own utilities), but that's probably a question better left to the tax law forum.
I'd like to have the county use the sale price as the assessed value rather than triggering a reappraisal from them and have them come back to me at an assessed value of $800,000. Any advice on how to have the preliminary change of ownership filled out so that it does not throw up any red flags at the county? It's my understanding that counties in California typically use the sale price as the assessed value unless something on the change of ownership document causes them to question it.
Execution of Deed: Price for Preliminary Change of Ownership for Partial Cash Sale (Avoid Reappraisal)
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