All Forum Posts by: Bill B.

The only lender that would take that deal is a lender that wants you to fail so they can take the deal from you. You’re giving them negative collateral. 

Imagine this is a $500k building. Seller has $405k tied up in the deal, 2nd lender has $95k tied up and you have $0. A year goes by. The 2nd lender has collected $9,600 in interest but still has all the money tied up. Suddenly you need a E30k roof, or $40k in AC units, or some other amount of money you don’t have. 

You walk away slightly ahead with the rents collected, 2nd lender loses at least $50k of his $95k in selling costs, and other expenses. (Unless they wanted the building and has the $405k laying around to pay off the seller.)

Imagine your best case scenario. Everything does great and in two years the building has appreciated to $520k, up 4%. Now you’re going to get a loan for 75% of that.  That’s $390k. You still need to come up with $10k for seller and $95k for 2nd lender out of pocket. Same situation you find yourself in today, only slightly worse. Assuming you got that loan with no origination, underwriting, appraisal or other fees/costs. 

This is basically an unsecured personal loan, like a credit card. Unless I wanted you to fail so I could get the building, and I had the $500k liquid to lend to you and then pay off seller when you fail. I wouldn’t do it for 18%. 

Ps. Are you going to feel bad every time you see this guy if you lose him $50k in the next two years or just ghost him and move on? Because if he makes this loan with no desire to buy the building he doesn’t deserve to lose his money but he should expect to.

Obviously you hire an eviction specialist, preferably a year ago they would have paid for themselves already. This is not a do it yourself situation. 

How come nobody is talking about the amount in question?  I have a cellphone with unlimited 5g through AT&T. It costs me $50/ PER MONTH and I can use it as a hotspot at no additional charge. 

How do you come up with $60/PER DAY as a hot spot charge?

Allstate does all 10 of my Vegas properties (along with a MN property and an umbrella). I’m sure they cover AZ a well. Get a few quotes and confirm you’re comparing the same coverage. (Which should be based on your equity and your total net worth.)

If you get the conventional mortgage and it records as a first lien that's simple every day deal. As long as the HML lender knows they're going to be in 2nd position that also shouldn't be a big deal. When you do the refinance you pay them both off assuming you added at least 120% of your removal costs in value. If the remodel only adds what you spend you'll have to come out of pocket another 20% of the HML plus closing costs to refinance. So make sure you can cover both loans for awhile.

Yes. I was trying to eliminate or reduce the taxes. If they just inherited there is no reason to worry about capital gains taxes or depreciation recapture. 

They can sell on payments or outright. The IRS will require them to charge a “reasonable interest rate” if they supply seller financing. And they’ll have to declare that interest on their taxes (Though the kids can then deduct it from their taxes.)

Lower the price instead? Lowers your downpayment and your costs based on loan amount. Might even get your a lower rate if it increases your downpayment percent. 

Have them pay the repair company before closing with that much of your earnest money going hard in case you fail to close. 

How elderly are his parents? They’re going to owe capital gains and depreciation recapture if they sell it to their child. If they leave it to them in their will all the taxes go away. (Less important if the property isn’t worth much more an they paid and they haven’t owned it very long.)  If he’s an only child that’s the obvious way to go. Less so if there are other kids as it’s less than fair to them. 

Maybe they could do some sort of private reverse mortgage? (Kids put a lien on the property to protect their interest and pay the parents a higher amount?)

Maybe a blend of the two and sell the kids 1/2 ownership of the house? (Only half the taxes are due and maybe they could afford a 15 year mortgage on the lower amount.)

If they can do farm accounting they can do real estate in their sleep. 

Ps. I have a dozen properties and I don’t spend an hour a month on bookkeeping (maybe 30 minutes). Try quicken. It’s $50 and super simple. If you use credit card for all expenses they are all auto entered. I couldn’t imagine a bookkeeper doing it for $50/mo and I couldn’t imagine paying $50. It’s your chance to look over how you’re doing. 

You can still sell. If your basis is $2M and you clear $5M after selling costs you’ll owe somewhere between $450k (all capital gains tax) and $750k (all depreciation recapture.). So you’d still have plenty of funds left to pay off debt. 

You can’t use 1031 exchange funds to pay off existing debt so a 1031 doesn’t really solve your problem. You could sell the properties with the problem debt instead? Refinance thsi property to pay off the other properties?