All Forum Posts by: Bruce Reeves

Thanks for the feedback. This is why I posted. Never had the thought of wildfires and homeowners insurance rates. 

Yes Erica, I do have NC on my radar. The Beech Mountain general area. I was surprised even though the elevation is not that high (4.5k?) the high temps for Jul/Aug rival the high temps in parts of the Rockies.

Been retired for four years. Getting the idea of a summer home to beat the heat in Arkansas. Landlord of 25yrs, so rental property is not something new to me. 

At this point I just have a fuzzy idea of what I want to accomplish but here goes. 

Looking to buy a small condo/house/townhouse for a summer get away for parts of Jun/Jul/Aug. Fish, pickleball, hike, golf, gym for activities. Decent grocery store and general shopping, not way out in a rural setting. 

Thinking the San Juan Mountains in Colorado or perhaps Eagle's Nest NM area. 

I have stayed at an AirBnb for a month in the past but no interested in doing that. That would make things too easy.

Budget is somewhat limited in the 200-300k range. Leasing it out via Airbnb or Vrbo is an option if available and demand is there.

No creative buying strategies needed. Just your basic 20% down get a loan, etc.

I know there are 84 other variables that come into play in making the decision.

Does the think tank here have any general pieces of advice?

The tenets are paying off the remaining mortgage via rent payments. I don't want to stop them paying my mortgage note until the duplex is paid off. I know the due on sale clause is unlikely to be called by the bank, but don't want to sell with even a small mortgage balance left.

Seller finance is to lessen the cap gain/depr recap tax hit. But am trying to get 75k out from the sale. If they get a bank loan of 75k, I will carry the remaining balance on a ten year with balloon. 

Looking for reason this (2nd position) is not a good idea. I'm not worried about tenets ability to pay. 

It's late I didn't read your post correctly. Current mortgage bal is 42k.

Property will be free and clear in two years. That is when I will sell.

My duplex will be paid off in two years. Current tenets are potential buyers. I want to pull some cash out of the sale. If sales price is 400k and I want 75k cash but tenets only can provide 15k, what are my options? I know I can sale to a buyer that has 75k down, but would prefer to work with my existing tenets. 

If the buyer got a loan from a traditional lender to get to the 75k number, would that automatically put me in a second position on my seller financed note? I am assuming the lender even at a low LTV would require a first position, but just guessing as this is my first seller finance transaction.

Found the example below on a website. This is the way I understand my first year tax liability when selling via installment sale. But after way too much time searching online, I get conflicting advise. I modeled a pro forma in my TurboTax and did not get this result. 

What does BiggerPockets say?

Let’s say you purchased a property for $400,000 and owned it for ten years. The property’s annual depreciation would be approximately $14,545.45 ($400,000/27.5 years).

• Your adjusted cost basis would be $400,000 – ($14,545.45 x 10) = $254,545.50
• So the realized gain on your sale would be $500,000 - $254,545.50 = $245,454.50
• The depreciation recapture tax would be 25% x $245,454.50 = $61,363.62

The challenge here is that depreciation taxes aren’t deferred or “spread out, " unlike capital gains taxes.” According to the IRS, you must report “any portion of the gain from the sale of depreciable assets that’s ordinary income under the depreciation recapture rules in the year of the sale.” In English, this means you must report the entire depreciation recapture amount – and pay that tax – to the IRS in the same year the sale takes place.

I had a similar question as well. I don't want to 1031 and I looked into the DST. I read you have to be an accredited investor (200k income or net worth 1M+), I'm neither.

So my solution to stomach the cap gain/depr recap is to seller finance. Of course this does not avoid it, just spreads it out depending on how you arrange the financing. 

May be an option for you. I feel better having the loan collateral than taking the net proceeds to the stock market and add to my IRA.