All Forum Posts by: Anthony Rega

@Anthony Rega

Maybe its from being "a seasoned mortgage professional with over 20 years of experience."  Although, I don't see 20 yrs of mortgage experience on your Linkedin profile.  
But, maybe think back to when your profile looks to have started out with equity trading.  Your taxable profit is based on your cost basis, perhaps enhanced by margin...

Similar for real estate.  Without a cost basis, there is no way to determine a taxable profit.

Well, if you ever want to chat, send me a private message.  Maybe that will help.

@Anthony Rega

I ran out of ways to explain it to you. Your seller already has NO TAXES. Because equity and mortgage have nothing to do with taxes. The only calculation that matters is:

Step 1. Difference between the sales price today ($800k) and the purchase price originally. You never said what they purchased it for. If they purchased it for $600k, then they have $800k minus $600k = $200k. This is called capital gain.

Step 2. Is this gain ($200k in our example) less than the $500k Section 121 exclusion? It is! Then there is no tax. Game over. You won!

What you're trying to do is create owner financing in order to avoid tax. But there is nothing to avoid! You already have ZERO tax. There is NO NEED to owner-finance anything! There is no Step 3.

The error that you insist on making is comparing the $500k tax exclusion to the $800k selling price. No, you compare it to the GAIN, which is only $200k (assuming they bought the property for $600k originally) 

Their remaining mortgage and equity do NOT change anything tax-wise.

Now, if you create owner financing here anyway, for some reason OTHER than tax savings (once again, because there is simply no tax, so nothing to save!) - then the only tax you owe is on the INTEREST portion of each payment as these payments are received.

@Anthony Rega

I still don't understand the hypothetical situation..  Still sounds like you aren't looking at profit for taxation...

I THINK to your question, this is like an installment sale.  Since the sellers are getting principal payments over time, they are realizing their profit over time.  Thus, it would be taxed, or part of the sec121 exclusion, over time.

I really don't know that much about how the installment sales or this sort of extended "installment sale," for lack of better term, is handled in detailed.  

Again, your example still lacks the purchase / cost basis, so you need to figure your issue on the profit.  The elements you are stating don't make much any sense as presented since one can't figure out a profit.

@Anthony Rega

It's not $500k of the price, it's $500k of the gain.

In other words, if they bought it for $300k and sell for $750k, their gain is $450k, and entire sale is tax-free, provided they owned it and lived there for 2 years and did not sell another home during these 2 years.

Long story short. Purchased a townhome 2018 before the military using FHA loan. Joined military 2019 deployed, came back and bought a single family home in 2021 using VA loan. Both are currently being rented. Talked to a couple lenders, haven't really dug too deep but lenders are saying my debt to income ratio is too high causing low purchasing power. Bottom line: how do I get more purchasing power? I have read about people having multiple VA loans and using the rent towards "income". Why can I not do the same?

My wife and I bought a home for $315,000 and it appraised for $365,000. We want to remodel, knock down two walls, get rid of the 80’s carpet, popcorn ceiling, new trim.

How big of a difference would doing a kitchen remodel do? Original from the 70’s, we would update, open kitchen concept.

The goal is to get rid of MI, and cash out refi to purchase another investment property. Thanks for your help!