All Forum Posts by: David G Vreeland

Insurance company is making me get a UL certified central fire alarm system for this 4 unit I bought in PA.  Hoping to get recommendations on any reasonably low cost options to meet this requirement.

Looking for recommendations on creative financing for two properties that I own outright.  I currently have low reportable income due to recently going completly self employed in 2023, and rehabbing these two properties in 2022 and 2023.  

Property 1: 3 unit mixed use.  Half the property is my office which was rehabbed in 2022 and partially into 2023; second half are the two apartments. (estimated 475k in value total)

Property2: Single family home.  Currently rehabbing the entire property, planning on moving into it at the end of december. (estimated 225k in value once completed.)

I own other properties that produce a decent profit and my business does well, however all the expenses related to the two rehabs are pretty much knocking out all my reportable income for tax years 2022 and 2023.

Any advice is appreciated.

Question: Is it possible to structure this deal where the current owner is able to keep the existing mortgage, while paying them off over time?
Also referrals to someone that could structure this deal are appreciated, property is located in Pennsylvania. 

Property: 2 Unit with 1st unit commercial and second residential

Current Owners Mortgage: $121,000

Property Value $300,000

Tax Basis: $50,000

Additional Details: Owner is a friend and contractor that for tax purposes makes very little money <$10,000.

Looking to do owner financed deal as the current owner wants to avoid paying capital gains taxes.

Say 30k in yearly payments going towards principle paid off over 10 years, which would keep him under the 40k income a year to avoid capital gains. 

@Ashish Acharya thanks for the reply

So under this scenario the seller bought the property for 100k and has taken 50k of depreciation and not capitalized anything else except the initial purchase of the property. Assuming the deal closes right at the end of 2021 and the downpayment is $30,000 would the seller recognize the 30k downpayment as recapture of depreciation, then the next 20k in the following year or would it be 50k for 2021? If it is just the 30k then assuming their total taxable income for the year is under 40k would they qualify for a 0% rate on that depreciation recapture?  From what I'm reading it appears that the seller will have to pay that 25% tax on 50k regardless of how little their taxable income is in 2021.

Trying to structure the purchase of a property at favorable terms for the seller in order to negotiate a lower price.

Property: 2 unit for $300,000 (property is worth $350k)

Seller Initially Bought it for $100,000 years ago

Adjusted Cost Basis $50,000

Sellers Existing Mortgage: $100,000

Seller has little to no yearly taxable income (5-10k) so installment sale would be ideal to keep them at 0% capital gains rate (under 40k/year).

Summary of Questions:

Is a wraparound mortgage the best structure to eliminate the sellers tax burden while keeping the existing mortgage?

Would the sellers conventional or FHA mortgage work with a wraparound?

Could a rent to own contract be used in conjunction with an installment sale to keep the sellers taxable income under 40k a year?

Is depreciation recapture relevant? If so when would the seller need to recognize that gain and how much would that be?

Are there any other items I need to consider when structuring this deal?

I'm a bit unfamiliar with installment sales but ideally the seller wants to keep the mortgage and do seller financing to us over 15 years.  So in a perfect world seller would keep their existing mortgage (which I believe if owner occupied conventional) and a portion of our payments would go towards paying off that mortgage.

Wraparound mortgage seems like the best bet and I would like to try and mitigate the risk of seller defaulting on their mortgage by paying through a third party if possible.  

I also considered a rent to own agreement that turns into a an installment sale once enough has been paid to the seller to pay off the mortgage.

The seller wants to walk away with $200,000 meaning the deal would need to be structured to avoid all or almost all taxes.  Depreciation recapture is a concern but the property has been depreciated straight line and from my very limited research straight line depreciation may avoid depreciation recapture.

Situation:  Owner sells a 4 unit.  Years ago they opened a stairwell to combine two of the units and live in both.  So they are technically living in two of the units and renting out the other two and have been there for 5+ years.

Question: Would only 25% of the gain from sale be excluded in this scenario or would they be able to exclude 50% of the sale as they have lived in two of the 4 units for the past 2+ years.  The property is also jointly owned by the spouses if that makes any difference.

I've never dealt with this scenario before and would appreciate any insight.

 Perfect thank you I'll look into it. If you have any suggestions of SBLOC providers you've  found to have the lowest rates/fees please post them.  Thanks again.

 Hey Wayne, Thanks for your reply.  Do you have any experience with doing that?  I'm a little bit familiar with Margin Loans but last time I looked into them there were some pretty severe restrictions on the type of assets that could be collateralized.  In some cases they could also only be used to purchase additional stocks and not be taken out of the account.

I'm curious if anyone has used their stock portfolio as collateral for hard money loans or leveraged their stocks in some other way to fund property purchases.  I am also familiar with using 401k to fund business financing (ROBS) so am curious as well if anyone has utilized that as well.