All Forum Posts by: Bill B.

@Jay Hinrichs and @Bruce Lynn

I remembered that deal too so had to look it up…

original deal:

https://www.cnn.com/2017/08/08/us/couple-buys-san-francisco-.... 

2015 this time. They actually failed to pay taxes in 1983 as well according to the follow up article below. 2 years later in 2017 the County reversed the sale voting 7-4 against “these out of town speculators trying to make a big payday” and for the fine people of their district. 

https://www.sfgate.com/politics/article/SF-supervisors-to-vo...

You forgot to say, or I missed it, how much you paid for the property. That’s the biggest part of the puzzle. 

If you sell for $460k and it costs you say $30k to sell, you net $430k. If you paid under $230k, you’d save $30k in federal capital gains taxes and maybe another $15k or more in state income taxes. That means you’d have to make $60k? In rental income it break even with selling instead?  (Call it 20% federal and 5% state ($15k in income tax, plus the $45k in additional taxes you created.). And that’s with zero vacancy, zero repairs, zero capex. And assuming a 0% return on the $200k you could have in the bank earning $10k/year if you sold. 

If you paid over $375k MAYBE you could keep it because the taxes saved are so low. But that also means you’re generating almost zero appreciation and barely better than bank CD returns. I’d probably still sell. 

The lending type doesn’t matter. The “Big deals” are…

You have to buy something you don’t already own, not pay off debt, renovate a home you own, or build on land you already own.

You have to spend all the “cash” you receive.

You have spend more than your net selling price.

You can never receive or have control of the cash, you need a QI PRIOR to selling. 

It may not add much but as it happens…

My new build home in Las Vegas (DR Horton build) specifically says I do not have any subsurface rights. I don’t know what they expect to find. We’re not a hotbed of oil, diamonds or even lithium. But I guess it doesn’t cost them anything to keep them. I bet if they found a subsurface problem, I would own those. :-)

ps. How would they get to any of these subsurface rights with 1/8th acre lots and barely 20 feet in any direction between any houses and any roads. 

You will definitely come out of pocket WAY more with seller financing than with the lowest owner occupant loans. You’ll probably pay a higher sales price and a higher interest rate as well. If you want to put less than 20% down skip the seller financing and move in to the property. Live there for a year while you fix it up. And then rent it out. Or stay a second year and sell tax free. 

Heck of a job keeping all the paperwork from 22 years ago. 

2 realtors and an inspector and none of them knew an old house or deck would be up to code? “Trust the experts.”

Why didn’t the inspector say the house wasn’t up to code, even more so than the deck. Good job. 

There’s a big advantage to naming 3 or less replacement properties in regards to 1031 rules. So keep that in mind. 

The advantage to doing a few lots for a duplex or quad plex at a time would be it’s easier to sell a few in a limited time than 9. PLUS, if a bank decides at the last minute they don’t want to borrow you money for a new type and price range of property for you. You don’t kill your whole exchange. Plus you can get 30 year loans instead of 5-7 year loans you would get on 5 units or more. 

Personally I'd stick with SFR or at 4 units or less for preferred financing and to reduce risk of the exchange failing. But it's your money.

Ask @Dave Foster. He’ll know the answer. My only question for him and you would be. Are you sure you can borrow the $500k of the $1M purchase since you won’t be the owner? Dave will know the answer and I just wanted to post this in time so he could explain the financing while telling you, I believe, that your refinance will be fine. And definitely  not to the the refi before hand. But it seems you probably already know that. 

As @Kevin Sobilo said. It really depends on your market. I rarely look at “older” homes in Vegas. But here older means 20-25 years old. Mainly I’m trying to avoid “aged poorly design” glassblock walls, small bedrooms, older windows (wood/aluminum, single pane), aluminum patio covers, and to a lesser extent landscaping. (Lots of grass and pine trees.)

Also also. You aren’t owners with lease options. That’s why sellers use it. They don’t have to foreclose because you’re just a renter with the option to buy.