All Forum Posts by: Greg Moran

Howdy DC area, I'm looking for a great contractor recommendation to work on a refresh of my basement 1B/1B inlaw suite. 

https://www.zillow.com/homedetails/121-P-St-NW-B-Washington-...

It'll be vacant for the next few months (bad timing for the peak summer rental season... I know) and I'm taking this opportunity to update and refresh the space to bring it up to market standards. Thanks for passing along any recommendations, if you know someone who can do a fantastic job on a diverse scope of work (framing windows & doors, kitchen cabinetry, electrical/lighting, flooring, etc.) Thanks in advance.  txt: 202-713-9499 or email: [email protected]. 

Quote from @Account Closed:

When you're dealing with a private money lending deal that has gone into default and you intend to write off the losses on your taxes, it's important to maintain proper documentation and follow IRS guidelines. To prove a loan modification as a loss for tax purposes, you should consider the following steps:

1. Loan Modification Agreement: Document the loan modification in a formal written agreement. This agreement should outline the changes being made to the loan terms, such as a reduction in the principal balance, interest rate, or extension of the loan term. It should be signed and dated by both parties (you as the lender and the borrower).
2. Reason for Modification: In the documentation, explain the reason for the loan modification. If the borrower is facing financial hardship or other circumstances that have led to the default, include this information.
3. Loan Value: Clearly state the original loan amount, the new modified loan amount, and the difference between the two. This will help demonstrate the amount of the loss you are writing off.
4. Interest Rate Changes: If you're modifying the interest rate, specify the original rate and the new rate.
5. Loan Term Changes: If the loan term is extended, provide the details of the extension.
6. Acknowledgment of Default: Include a section where the borrower acknowledges the default and the past-due amounts.
7. Professional Advice: It's a good practice to seek legal or financial advice when structuring the loan modification to ensure it complies with any applicable laws and regulations.
8. Keep Records: Retain copies of all correspondence, emails, and documents related to the loan modification.
9. IRS Reporting: Report the loss on your tax return. For personal loans, the specific form you use will depend on your overall tax situation. You might need to use Schedule D or Form 8949 to report capital losses.
10. Consult a Tax Professional: Consult a tax professional or accountant to ensure that you are properly reporting the loan modification as a loss in accordance with IRS guidelines.

Remember that tax laws and regulations can be complex and subject to change, so it's crucial to consult with a tax professional who is knowledgeable about your specific financial situation and the most current tax rules. They can provide guidance on properly reporting the loss and maximizing the tax benefits associated with it.

I recognized the format of an AI-generated response. Yours is more detailed that this simple Chat-GPT answer though... Thank you!

This is almost like the "Let me Google that for you" service! The equivalent of www.lmgtfy.com but with AI.  B-) I Like it. 

Investment Info:

Small multi-family (2-4 units) private money loan investment in Hampton.

Purchase price: $48,000

Contributors:
Marsay Winder

(09-23-2023) Private Money lending deal #7, with Marsay Winder a.k.a. The Property Pastor. This property is a former boarding house rented out by the room, which is being converted (back) into a single family residential.

What made you interested in investing in this type of deal?

PML deals are passive RE investing strategy

How did you finance this deal?

Self-directed Roth IRA

How did you add value to the deal?

Having capital available for a 72-hour closing timeline.

Quote from @Account Closed:

... fire some questions at me and let me provide you with some insight that I'm hoping will be helpful to you in your investing journey.

Thank you for the offer! My question has to do with taking losses from one of my Private Money Lending deals that went into default.  I, as the lender, am planning to help a borrower with a loan modification and will therefore have losses to write-off from my 2023 taxes. What paperwork is required to "prove" my loan modification as loss?

Quote from @Nathan Harden:

This is a tough spot to be in, man. I will be interested to hear what a lender or someone who has experience in this has to say about it. Have they shown any progress in taking the correct steps moving forward?

 That is one other frustrating thing about this whole deal... the borrower goes silent any time they have problems.  I never heard from them once, while their original PML was in default.  It wasn't until the property was under contract that they reached out. I even told them i expected more proactive communication during this roll-over loan period. 

Thanks @Jay Hinrichs and @Russell Brazil. Also tagging @Nathan Harden for this update: The property finally sold with sufficient proceeds to pay off the first lien holder. I, as the second lien holder, came up short.  Therefore, I offered to "roll over" my PML into another unsecured loan.  In negotiations with the investor, we agreed to a 6-month 15% interest only loan with 5 points to allow them additional time to pull the money together (Yes, this lack of liquidity is a red-flag). I also insisted on either: a) other collateral or b) a personal guarantee clause. The borrower opted to sign the personal guarantee. 

I wonder if i'm simply kicking the legal battle a few months down the road...? We shall see if they make the interest only payments on time.

Have you looked into Nest-DC (https://www.nest-dc.com/)? I see them around our neighborhood, but have never used their services since I self manage my 1-bed basement apartment. Here's the direct link to their management services intake form. https://nestdc.typeform.com/to...

Another month... and another "notice to cure" sent. I'd love to talk with someone who has been through a PML loan default before. As a second position lien holder, what are my options?

Investment Info:

Single-family residence private money loan investment in Enid.

Cash invested: $27,600

Contributors:
Matt Mesick

UPDATE: (10/02/2022): Borrower has defaulted on the loan and emailed to say they are unable to pay until the property sells. I checked the listing and it's been on the market since 12 August (50 days), with one price drop. Drawing up "notice to cure" memo with late payment fee schedule now. B-(

Belated Update: (03/07/2022) Borrower reached out asking for an extension so we agreed to a 1.5 Origination Points extension fee and 6 more months at the same interest rate.

Investment Info:

Single-family residence private money loan investment in Enid.

Cash invested: $27,600

Contributors:
Matt Mesick

UPDATE: (10/02/2022): Borrower has defaulted on the loan and emailed to say they are unable to pay until the property sells. I checked the listing and it's been on the market since 12 August (50 days), with one price drop. Drawing up "notice to cure" memo with late payment fee schedule now. B-(

Belated Update: (03/07/2022) Borrower reached out asking for an extension since this project was going slower than anticipated. We agreed to a 1.5 Origination Points extension fee and 6 more months at the same interest rate.

(09/18/2021) Private money deal #5 in works with @Matt, another BP contact from late 2019. He kept messaging me with great deals throughout the pandemic, and we finally connected with one that met my lending criteria. We're talking about doing a 2nd position lean to support National Homebuyers LLC getting a lower interest Hard Money Loan (HML) for the majority of the purchase price. My capital will also fund the first construction draw.