All Forum Posts by: Alan Francis

Hey @Dave Foster I'm so grateful you commented. I was hoping you would. After reading some forums yesterday before posting my question I was kind of expecting a response response from you to read the way it did. 

However, you mentioned one thing that peaked my interest. In your third comment, you described a situation where I use my own cash to complete the exchange. Coincidentally, I just put another property under contract and plan on entering the transaction from a highly leveraged point only putting a small amount of my own capital into the deal. The real world example I'm working on is below (rough numbers):

Purchased property #1 5 years ago at 225k selling on owner finance at 400k with 175k net capital gains unrealized.

Entered contract to buy property #2 at 330k at about 90% leverage. 

in this example is there a way to protect my gain from the "sale"  by tying it to the new purchase even though the amount of capital gain moving out of the first property is 175k and the capital going in to the new deal is only 33k? Other than that fact, it seems to tick the all boxes for a successful and normal 1031. 

Assuming you respond that i can execute a 1031 this way I have one last question. I promise ;). I very much appreciate you taking the time to reply. If the sale of property #1 is ultimately unsuccessful for some reason. Say in 3 years the new borrower goes into default and I take back the property. What does that mean for the 1031?

I'm struggling with this very thing right now. 

I'm considering selling some property owner financed through an installment. Probably dissimilar to most who do this, I'd prefer to finance 100% of the transaction and offer lending terms that are interest only. 

I'm attempting to create a scenario where I only receive interest income, and the only way to receive any capital gains would be when the buyer eventually refinances the property and pays off the debt instrument in full. I'm also considering language in the note that requires full principal payment only. No partial payments.

Part of the idea behind this is so that I can utilize a 1031 exchange at that time. 

Am I way off base here? Is this possible/right?

Hello BP,

I currently own two 4 unit buildings.  Both buildings came with inherited tenants, and lower than market rental rates.  My initial intention was to clean up units and raise rents as tenants move out, but I haven't had much unit turn over. 

The rents range from $600 to $750 per unit and I'd say that in general the rents are at least 10% - 15% ($75 - $100 / unit) under market. I'm trying to avoid a drastic price hike fearing most the tenants will walk. Most have been in place a long time, don't cause trouble, and pay on time. I'm thinking they've been there so long because of the attractive rental rates. Also, those units were the tenants have been the longest will need the most work to bring back online once they leave.  

I feel like I'm caught in a catch 22. I'm leaving allot of money on the table monthly and annually, but if I try to recapture the lost dollars too quickly I expect I'll  be forcing out quality tenants and face updating costs and vacancy.  On the same note I did experience a pretty substantial tax and insurance hike this last year so I absolutely need to do something.

The last Podcast with Bruce Peterson had me thinking. He was able to raise rents up a couple hundred dollars in a few years. 

If this where your situation what would your strategy be. I'm thinking of doing a $25 increase on rents this year across the board and trying the same next year. Thoughts? 

Let me know BP Community!

Thanks in advance. 

I had a similar experience in Illinois. I was buying a turnkey home, the seller didn't have any financing on the property and I was planning to close cash and add financing later. Thankfully my attorney asked about flood insurance (to that point I hadn't had any experience with flood plains or flood insurance) I asked my insurance provider to check into it for me and right away realized an A flood plain. Premium was also around 3k and ate deeply into the rental profits. We tried renegotiating the price based on the new cost, but couldn't make it work. Ended up having to walk away.

I'm trying to do something similar to this on a fourplex I have. As the seller I'd like to carry back a portion of the overall transaction requiring the new investor to bring less cash to the deal.

Example: sales price: 300K

Owner finance second mortgage: 45K (15%)

Buyer down Payment: 30K (10%)

Bank Loan: 225K (75%) 

Has anyone structured a deal where the seller held back a second position lien? It appears this can't be done via conventional loans as they are capped at 75% CLTV on investment four units. I'm looking for finance companies that may do this.

I'm not sure if a structure like this could help your situation. You buy on seller financing... sell the property to the next buyer and let them bank financing and carry the difference or sell the note...?

Hello, I purchased my first buy and hold property late last year under my personal name. I'm looking to start adding more properties later this year and decided I better get a business entity established sooner than later. I met with an attorney that specializes in Business, Real Estate, and Estate Planning and his suggested structure was to utilize an Indiana (that's where the investment is located) land trust in which an LLC is the beneficiary of the trust. His reasons for suggesting this was for added privacy in the purchase (of future properties) and holding of the property since the Trust documents are private. The other major benefit is that if there was legal action against one individual property the litigation can't flow through to other properties the LLC may be a beneficiary of. It seems that this is easier and cheaper than creating new LLCs for each property which some other attorneys have advised. Anyone familiar with this structure and can comment on whether it's a good or bad idea? Sorry if this isn't clear. I'm not a legal jargon kind of guy. Thanks!!

Hello, I purchased my first buy and hold property late last year under my personal name. I'm looking to start adding more properties later this year and decided I better get a business entity established sooner than later. I met with an attorney that specializes in Business, Real Estate, and Estate Planning and his suggested structure was to utilize an Indiana (that's where the investment is located) land trust in which an LLC is the beneficiary of the trust. His reasons for suggesting this was for added privacy in the purchase (of future properties) and holding of the property since the Trust documents are private. The other major benefit is that if there was legal action against one individual property the litigation can't flow through to other properties the LLC may be a beneficiary of. It seems that this is easier and cheaper than creating new LLCs for each property which some other attorneys have advised. Anyone familiar with this structure and can comment on whether it's a good or bad idea? Sorry if this isn't clear. I'm not a legal jargon kind of guy. Thanks!!

Chris T. Thanks everyone for the specifics and solid answers. The existing sump pump drains pretty far from the house. I don't think that is he problem. I had another house with a sump pump that spit right next to the foundation wall and it drained right back in only to be sent out again. At this home, he backyard has been almost entirely covered in patio pavers and is pitched the wrong direction. Most of the water has nowhere to go during a heavy rain and drains toward a walk out basement "pit" this is where the water is accumulating. I thought a French drain may be the best solution. Install one around he retaining wall (surrounding the wall out pit) draining to the street, but I'm not sure who is the right person to call for this. Thanks again for all the input. I'm not sure if pictures are allowed in these forums but I can add some tomorrow if they are.

Hello I recently bought a home in the western suburbs of Chicago and realized during the last heavy rain I have some drainage issues. I'm having water pool next to the foundation wall of the home and noticed that the sump pump runs constantly during a storm. I'm not sure what type of professional I need to come evaluate the situation. I did some googling and thought a landscape architect may be the best person to go to first. Has anyone had any experience with this type of problem? Does anyone have any references for someone that can help in the Chicago western burbs? Any help would be appreciated. Thanks

Hey @Kim Meredith Hampton and @Joe Splitrock,

Thanks for the replies.  The leases I took over did not have a "no smoking policy" in them. I think you are right that this is a lesson learned, and that its going to cost me a bit of money. 

Once I have the unit put back together and ready to go on the market i'll be sure to take the photos you recommended.

Thanks for the help.