All Forum Posts by: David Hayes

I've never used MySmartMove.com, let me know how it goes if you end up using it.  We always ask tenants to pay an application fee before we pay for screening.  We email them confirmation of payment as their receipt, just so they have something documented. If they don't make the payment for the application I think it shows they aren't really that serious. 

Really good overall guide to renting your house here on BP if you haven't read it yet, I highly recommend:

http://www.biggerpockets.com/renewsblog/2013/01/04...

Thanks for the great feedback @Bill G. , very helpful. Our first thought was actually to purchase Subject-To, but I didn’t think about him carrying his equity portion as a second mortgage.

A couple of clarification questions just to make sure I understand.

“His taxes will be due on the principal amount received, not the entire sale price but from his basis,” – So in this case, I looked up the land value, it’s ~ $75k. Assuming the Sub-2 purchase price is $200k and the remaining $125k is fully depreciated than his principal that he would be required to pay taxes on is $125,000, correct? But if I understand what you’re saying correctly, by making it essentially a seller financed deal, he is not actually receiving the $125,000 all at once, he is receiving it over time, thus not significantly impacting his tax situation in one year. Ultimately he still pays taxes, but by deferring it’s in a lower bracket, thus less overall taxes in the grand scheme of things. Is that right?

You also mention “he will be paying interest income on his equity amount he carries back” – Do you mean he will also be paying taxes on the interest received from the seller financing of the second mortgage he is providing? I’m also assuming we will get to deduct the interest expense of both the current mortgage and the second mortgage on our side, even though the primary mortgage is still in the sellers name. Is that correct?

I'm clear on the need to be able to refinance or sell in terms of any due on sale issue, that shouldn't be a problem. And your last point – unfortunately it's not in an LLC, but I will keep that in mind for future subject-to purchases.

Thanks again for your help!

David

Hello BP community, I have a question for you, I’m assuming someone has tried something like this but I can’t seem to find much information out there, so maybe not. Here is my situation:

We have a motivated seller, he has a 4 unit apartment building (technically fee-simple townhouses, they are all separate parcels, but not really important in this discussion) he would like to sell. He has owned them for a long time so they are fully depreciated, but he has refinanced them multiple times – so he still has a pretty high mortgage. My understanding is he will have to pay capital gains tax on almost the entire value of the sale price (minus land value and any capital improvements) since they are fully depreciated.

The problem we are trying to solve for: Is there any way to transfer the property to us where he can avoid paying the taxes?

Our thought for a creative solution…we form an LLC together, he transfers the property into the LLC, we refinance the property to pay off the old mortgage and give a "buyout" to the seller for his position in the LLC at a later date. At the end of the day we have full ownership of the property and equity in our LLC for no money down and seller is happy because they got more money than they would have selling traditionally. Is this legal? Is there other ways to do this?

Here are some numbers we are looking at:

If the seller sells on the open market, this would be his approximate situation:

Sale price = $200,000

Realtor commissions (6%) = $12,000

Payoff mortgage = $125,000

Money back before taxes = $63,000

Tax bill (assume taxable gain of $150,000, capital gains of 28%, state of 5%) = $38,000

Net money to seller = $25,000

If we transfer the property into the LLC, here is how we are thinking about it:

Asset contribution value to LLC = $175,000

Refinance (75% of $200,000) = $150,000

Payoff old mortgage = $125,000

Money to seller = $25,000

Remaining seller equity in the LLC (to be paid out in an agreed upon time frame, 5yrs?) = $25,000

Has anyone tried anything like this? Is there better ways to structure this deal or make it a win-win? Our goal is to acquire the property with little or no money down, sellers goal is to get out and have the most money in his pocket with the least amount for the government. And of course we want to make sure we are doing everything legally.

Any feedback is appreciated.

Thanks everyone for your input, that is about what I suspected.  

Just curious if anyone has any experience digging out crawl spaces to make livable basement space?  I have a house in a nicer area of Cincinnati (Wyoming), I got it for $240k, houses nearby are selling in the upper $300's but have a little more space.  The only other major repair needed is the kitchen, other than that it's pretty basic stuff.  I'm curious if anyone has dug out a crawl space to add square feet to the house and if this is a good investment (could be added as square feet to the listing with a entry door to the basement also added).  Or is it better to do a room addition for more space?

For reference, my crawl space is already about 5ft deep, I would want to dig to have a normal ~ 8ft ceiling. It would add about 900 sq feet of space, and if I added a bedroom/bath, etc I could really improve the specs on the house. 

If you've done this before I would love to hear your experience.  If you have a contractor in Cincinnati area who does this I would definitely like their info.

Thanks!

Welcome @Joe Doxsey I'm getting ready to move back to Cincinnati, looking forward to being back in Ohio, lots of good stuff happening.  

Welcome @Donald Kimball - lots of great stuff on BP, I definitely recommend reading a lot of the resources on this site and listening to the podcasts to get an idea of what REI is all about and the many different ways it can be done.

Hello BP community - anyone have recommendations for someone who can fix dishwashers in Cincinnati, Ohio? I have single family rental in Liberty Township/West Chester area, dishwasher just went out. It's not that old and it's a LG, decent dishwasher, so I'm hoping to get it fixed rather than replaced. Any recommendations?

No doubt I will also need other contractors service sometime in the future, so if you have anyone you like and want to recommend in Cincinnati area please let me know.

Hi @Cappy Jones , welcome to BP, I currently have 1 property in Cincinnati buy/hold rental in the West Chester area. I might be interested in doing more in the future, where is your property? What neighborhoods are you looking to continue investing in?

I look forward to hearing your story.

Thanks @Darrin Carey , I have heard good things about COREE but have not checked it out yet. I think Brian was going to go once, but one of these winter vortex storms had other plans.