All Forum Posts by: Andrew Klein

Hi all, 

I have an interesting off-market deal I am trying to put together that would involve a loan payoff in cash and the remainder of the negotiated property value in stock of a not-listed startup. The seller needs to be an accredited investor because of the securities portion, but here is what I am thinking:

The seller owes $130k and would like to pay off his loan.
The house is worth about $215k. Given today's interest rate environment I am not that interested in paying full value because that is a losing proposition rental-wise, so I am trying to find a way to make it work by working in some other advantages.
I am currently overweight in a startup stock as I was one of the early investors and am hoping to pay off some of the loans I took out to do the initial investing. I also have an unsecured line of credit that would be able to cover the $130k loan.

I am proposing:
Pulling out $130k from my loan and doing a cash purchase of $130k and transferring the remaining $85k in stock value to the seller to purchase the home.

Question are,

How do I account for the stock?

Do I just say consider the purchase price as $130k and transfer the stock almost like a gift? Would the stock then be considered "boot"? How would I account for that?

Do I need to make a sale contract for the stock first? That would be taxable if yes, so I would have to sell a little more to cover my tax liability, right? I have plenty of the startup stock, but this likely wouldn't be worth it if I cannot enact an exchange of some sort that would defer the stock gains.   

Let's say the seller owns his property in an LLC, is there any way I could utilize 1031 exchange rules to exchange partial ownership of the startup for partial ownership of the LLC? Then buy the rest of the LLC out with cash? If it isn't in an LLC yet, could he quit claim deed it to an LLC quick and then run this strategy?

I am low on cash which is why I am considering this. I intend to cash out refinance after the purchase in order to borrow against my stock value. Would that negate anything? Would I need to wait a certain amount of time before borrowing against the house which I am exchanging (at least in part) the stock for? I think a standard 1031 exchange blocks refinance options for some time afterwards. 

What am I not thinking of? I know the SEC rules are pretty lenient as long as the purchaser of the stock is accredited, but combining a deal with real estate is another complication I don't know how to deal with right now. How dangerous are some of these strategy questions? I don't want to run afoul of some other finance law I don't know about yet. But, if there is a way to exchange the partial company ownership for a different asset without causing massive headaches, I would like to explore it. I am sitting on massive value that is not liquid at all and I would like to convert some of that to cash-flowing assets. The seller of the house is interested in hearing more about the stock but would want to buy in with equity in the house rather than cash. How do I make this work?

I have a property I am trying to sell and the buyers want to close 6 months from now when they are good and ready to move in and would like to keep their inspection contingency until then in case there is any spring water damage or something else happens between now and then. This is a long time to have the property off market while I am trying to sell it and I think an option fee would be appropriate in this situation. If the ask price is $135k, what should I charge?

I am in the middle of an introductory class to bookkeeping and highly considering taking the full class to become a professional bookkeeper. Do many real estate users use them? Would anyone be willing to teach me how they do their books in exchange for a free month bookkeeping help? What are people's experience with being a bookkeeper as a way to amass a downpayment or experience with hiring them to further the business?

I have a cash flowing rental property that has all my money tied up in it. It is a good rental, but I am not good at the patient game until I can save for another downpayment. Would anyone want to buy a half interest? For example, the I sell the property to an llc consisting of me and someone else. The main drawback would of course be the closing costs, but if the buyer and seller as well as terms are already decided, I know an agent that would facilitate for 1% of the purchase price. Thoughts?

Beautiful property for rental, AirBnB or to live in while investing in the twin cities area. Selling my personal residence due to a work move. Rents in the area are around $1500/month but the property is very nice with plum trees, 3 kinds of grapes, blueberries, raspberries, lettuce, kale, herb garden, rhubarb, etc. Would be a great AirBnB property. 

First of all, congratulations!

I am a new investor myself with a whopping 1 deal under my belt, so I'm not sure I am the best advice, but I would say the absolute first step is to have a real in depth conversation with you bride to know what's comfortable.

From a monetary perspective, I would buy a cheap home in a good area that needs many repairs, add your sweat equity, and trade up your home in 2 years (or re-finance and use that to start earlier).

BUT, entering marriage with a brand new home that needs A LOT of work could put a strain on your relationship.  If she isn't in this game for herself, it would be a bad idea to have any update the house needs still being worked on after you move in. You would need to contract it out to make sure it is finished in time and you will probably lose the majority of your equity build.

A good compromise if she is not independently interested in real estate would be to look for a duplex that is 1 and 1 (not side by side, but a main house and a carriage house) or look for a single family home on a double lot that you could subdivide. That way your investment activities are not impeding on home life.

Whatever strategy you choose, make sure you know if it is your hobby and she is supportive or if it is a shared hobby. Then you can plan your strategy accordingly.

I want to vet an idea:

I just finished my first re-hab on a BRRR property and the refinance is not going to get me enough money to do another deal. So, I thought of selling the property and remaining the property manager. Would investors be interested in purchasing a finished cash-flowing property with property management in place. The only example I can give for how it would work is my current home. I did the numbers right on the rental (at least its performing exceptionally well so far). I currently make about $100/month on the property plus the money I pay myself to manage it.

Is there a large value-add to investors to receive a property already running and would said person like keeping the previous owner as property manager? If the relationship goes well, I could use the sale money to purchase another property and run this deal again.

https://www.biggerpockets.com/calculators/shared/4...

Thoughts?