All Forum Posts by: Christie Gahan

October 2023, HUD issued new guidelines on loan requirements. Now 75% of legal ADU rent can count toward income to loan. They also said that they would have new rules on how appriasers value ADUs. Goal is to get more standardization from the appraisers. This may ( should) make purchase and refi easier plus get more money for the ADUs.

Reccomend "ThatADUGuy.com"   .   

Lots of free content.  I booked a conference call and it was great.

 The sad thing about the cartel / violence in Mexico and South American is that it was all fed by illegal drug use in the United States and Canada.  

What is your timeline on this?  How many years until the child lives there?

When time to buy ... floor plan with double master is popular.

I use equity trust.  Msg me if you have questions.

No syndications right now.

Keep in mind, when lending, that not all of your money will be earning interest all the time so your actual rate of return will vary.  Think about your loan app fees, etc for your market.

Andrew: I just had a mtg with my lawyer on this .  I will share some of his questions / concerns.

1. Will you be asked to sign on the construction loan?  Many lenders will not proceed with out you.

2. Will your interest be sujugated to the hard money / construction loan?   This is like if they were both loans, yours would not be in first position.  If things go belly up, the other loan gets paid first.  You would get, potentially, the left overs.

3. If actual costs are higher then projected costs ( rise in material or labor cost), the GC may come back and ask for more money.  If you don't want to kick in more money, then how does the project get finished ?  How do you get your orig money out of the deal.

4. The Operating Agreement of the LLC / JV is really important. All of these need to be covered.

5.  Does the GC have a crew already?  Has he done this before? Have you checked his business credit?  Does he gave key man insurance.  It goes on and on and on.

6. My personal take away is that you might as well marry the guy.!  Ha!

Another important piece: you will not be in long term cap gains. This is ordinary income plus social security and maybe state income tax. My accountant said that the JV agreement needs to be about double the dollar amount of what you would want if you were to just sell the land.

Whose accountant determines the amount of profit?  Using what accounting methodologies?

Hope this helps.

I'm in a similar situation. Get your exit strategy mapped out now. I've been apporached by developers that want to JV. Lots of risk that you can't control and it is taxed as Ordinary Income plus the IRS will see you as self employed so you will pay all of the Social Security tax and perhaps a 2.5% extra tax if you make over $250k. Plus, you may owe tax to the state of Georgia. You are well over 50% tax. If you just sell it, the first $500k is taxed at 15% as Long Term Capital Gains, anything over is 20%, No SS .... So a Joint Venture offer needs to be double an offer for a traditional sale to make up for the tax differential.

The property must be in an area that the government has identified as an Opportunity Zone.

You must have short or long term capital gains.  This money has to be put in an Opportunity Zone Fund. ( I believe there has to be a least two participants in the fund.)   You can put together your own Opportunity Zone Fund with your lawyers and then you must follow lots of laws and regulations and paperwork.  But, you get to pick the individual property.  If you do not want to do this, you can purchase a property, or a portion of a property, that the fund has already selected.

You must spend money to improve the property. ( I think it is a percentage of the gain you had)  You must hold the property for 10 years.

Then, winner winner Chicken Dinner.  You pay no taxes on the transaction that created the original gain and no taxes on the gains your Opportunity Zone Fund earns in the ten years.

I'm really stuck on the idea of paying $24k a year to an HOA. Ugh.

Prop management in my area is 8 -10% Plus half of the first months rent.

I'd get some firm numbers from locals on prop management and if there is a wait list for him to be able to rent it.  Can he comfortably cover the payment is he gets a POS tenant?  Worst case scenario, he has to evict someone.  How many months is that ?  6?  So he needs to set aside $36k as a cushion?  

He really needs to clarify goals, get with a good tax planner etc.  But, if he has equity in the property , I would sell and get the $250k tax free gain.

You have a new baby on the way.  Stack as much cash as you can, while you can.  What is child care for an infant cost in your area?  $1,500 ?  $2,000 ?   What will you be able to save then?  What other expenses will change?  More diapers, clothes, eating out?  This is a terrible time to make a major life change that you don't have to make.  Your wife wants to pay down debt. What debt?  What interest rate?  This will effect your ability to get a loan too.

Look in to kindergarten options.  In many states kinder is part time or full time.  It may not be required to send your kid.  Kinder is all about the indiv teacher.  Good kindergarten teachers are born that way.  Kinder is about the kids learning to stand in line, wait there turn and not eat glue.  You can change school districts in first or second grade and there will be no noticeable difference later on.  Check out private schools, church based options.  Go to the Open House for the elementary near you.  See what you think.

Don't try and time the market.  Even if your logic is correct this is a terrible time in your life.  You and your wife are headed in to a really hard chapter of life.  A baby and a toddler is hard AF.