All Forum Posts by: Carlos Santiago

Does anyone know if I can put the profits of a seller-financed mortgage into a 1031 exchange? I'm sure I can't put the monthly payments that I receive (since they've gone into my bank account). But what about the majority of the money that comes due when the Balloon comes?

Anyone have any updates to this? The way people are talking in my town (texas) -- they think this is a really big deal.

Question on Taxes:

Bought an investment property in 2009. Spent time renovating the property and its ready to rent in March of 2010.

I believe I cannot begin depreciating this property on my 2009 taxes because the property wasn't available for use then.

Can I take depreciation starting in 2010 taxes? Even if things like Carpet and Stove were purchased in 2009?

Thank you.

Yes, so helpful! I forgot to mention there was a $2K down payment. and of course, taxes will eat some profit. Thank you Mr. Collins.

How do I calculate the rate of return I'm earning on my money when I hold a note for owner financing? Details:

$45,000 (investment = property + rehab)

$58,400 note - 8% int. 5 yr. balloon, $525/mo payments (p+i)

purchase price = $43K
rehab loan = $24 K
(loan total 67K)
ARV appraised is $84K
rents for $795/mo

no money down loan, 7.5% interest from local bank. 20 year loan.

Ahhh, I have now figured out what you are explaining to me! I was not understanding the cost basis - but now I see. I can't write off "repairs" if they are part of the cost basis. I get it now. Thank you.

Okay, thank you for taking the time to talk with me about this.

Okay, let me tell you what I'm confused on...

This doesn't have anything to do with taxes...just general accounting... (same scenerio as above):

A) If I took a $25K loan to purchase this fixer-upper -- say my mortgage payment is $250/mo. Then, say I use MY OWN $25K (no loan) to fix it up. In the end, I have a $50K cost basis on this house. My spreadsheet looks nice - it shows each month an expense of $250 for mortgage, plus all the other expenses I racked up fixing up the house.

B) But, on the other hand, if I take a $50K loan ($25K to buy the house AND $25K to fix it up) (and supose a $500/mo mortgage) -- then my spreadsheet looks different because now each month I'm showing an expense of $500 AND I'm still puting down all the fix-up expenses.

So - option A -- is showing the true cost basis in my accounting (NOT THINKING ABOUT TAXES)

option B -- shows a cost basis of $75K

Dave, let me thank you again for taking the time to try to explain this all to me. I feel like I'm going to blow out a braincell trying to really wrap my head around this subject!!!

I see what you are saying -- I understand cost basis, and yes, any part of the loan that isn't used for rehab will be paid back on the loan.

I used 'lumber' to illustrate a "repair" not a "capital expense". Wouldn't that be seen as a repair (assuming it was used to, say, fix a hole in the wall or something?)

But I guess I still don't understand... That $50.00 in lumber (in my example question) is part of the cost basis (since it was paid from the loan). But I can ALSO deduct it on taxes --yes or no?