All Forum Posts by: Henrik Frank

I'm working a deal with friends of mine. They are in a "must sell soon" situation since they are having a hard time making their payments. At the same time, they are trying to stay as long as possible since they don't have the required 24 months of primary residency in order to qualify for the $250k Capital Gains exemption. They do qualify for the partial exemption (according to them), so every month they "own and stay" longer is beneficial for their Cap Gain situation. I'm going to buy, rehab and sell, so I'm trying to figure out if there is a way to structure the deal so the actual sale date (for Cap Gains purposes) will show up as the date I close on my sale after the rehab - or even just as a specific date 6 months or so in the future (it will take me at least that long to complete the project). That way, their exemption would grow from 15/24*$250k=$156,250 to 21/24*250k=$218,750, which would save them $10k-$15k in Cap Gains taxes

Deal facts:

Property is in CA and it was purchased in 2001 for $178k

They have used it mostly as a rental, but have lived there for the last 15 months

1st mortgage has $160k left

There is a recorded lien for $50k (to a friend of mine)

I have a non-recorded note with them for $19k

Sales Price to be $390k (ARV is $530k)

They are willing to do a Subject To deal (let's say for 100% of the price for simplicity) and I'll pay them interest on the delayed profits

The problem is that Subject To still establishes the sale date as the opening date of the project. I thought about doing a Lease Option where I pay the monthly "rent" directly to the lenders, but I'm worried about my risk if they declare bankruptcy, something happens to them, or any other imaginable scenario that would put my ownership at risk. 

Essentially, I would like a scenario where I'm guaranteed ownership. I'm happy to delay the ownership transfer until after I finish my rehab - as long as I'm guaranteed that it will happen.

I'm not too worried about any DoS clauses. I'm fairly certain the 1st lender would like to have someone make the payments with certainty, and if the loan is called due, I can cover it. The 2nd lender is happy to have me take over the loan as well.

I'm NOT looking to do anything illegal. If there is no solution that satisfies everything legally, then they'll just have to deal with the extra Cap Gains. I'm just trying to see if there is anything I can do to help them out and give them a better deal. 

Thanks,

Henrik

I'm looking at a property from FannyMae that just hit the market. However, it's tagged with their "FirstLook", which means they only accept offer from OOs and "buyers using public funds" for the first two weeks.

My question is - what prevents me from making an all cash offer right now? Maybe I'd really like to live in that unit, but once I fix it up, I realize that I don't want to live there at all?

I don't understand the reasoning behind FirstLook - it seems investor offers would be a good thing? (I know - that's a whole different thread).

Would I risk getting black listed by FM or angering the selling agent?

I'm just trying to gauge how to proceed here...

Thanks,

\ Henrik

Thank you everyone for your helpful comments!

@Don - good point about going by the property at night - for whatever reason, that never occured to us, but it's on the list of things to check now.

@Rob and Bryan - I get what you're saying, but deals aren't abundant for us right now. We may have to jump on something less than ideal.

@Michael - one of the things that's difficult for us is exactly what you mention - we hold properties up against the standard of what we would want to live in. We need to stop doing that. I also like your idea about interviewing recent buyers.

@Steve - that is along the lines of what we were thinking. The home has a pool, which normally adds about $20K to our ARV and is big in the plus column, but we were thinking around $10K in subtraction for the bad neighbors.

The neighbors aren't horrible - they just aren't great either. The night scene may be the determining factor.

Thanks again to everyone,

\ Henrik

We are looking at a place in our farm that's appealing, but the neighbors aren't great. They aren't terrible (war zone or horders), but certainly not nice either (one neighbor has an old car sitting in the front yard).

Overall, the neighborhood is hit or miss. There is a huge mix of houses ranging from old and beat up 60s houses that can be had for $60K to brand new and reasonably high end houses that will run $250K+ (for bigger ones). On any given street, you may have a cluster of really nice places and then an old and worn one, or the opposite.

We have the ARV for the house in question as $170K. How much would you subtract for two ugly neighbors (one next door, the other across the street)? Or would you kill the deal because of this?

Thanks!

We came across a property that may fit our numbers for a rehab. However, I'm concerned about the location. The street is a nice enough neighborhood street, but the lot on one side as well as the rear neighboring lot are both empty. I assume this will lower our expected sales price? The lot on the side has recently sold for $30K, which could mean a house is being planned, but we can't count on that. The house we are looking at is listed at $95K, but needs more than average repairs, so our offer will definitely be lower. We are still working on the estimate as well as the final comps, but I thought I'd ask about the location here before investing too much time.

Since a picture is worth a thousand words, I've uploaded one here: http://www.try1stgolf.com/images/Image1.jpg

Please take a look and give me your opinion on the location. We are still pinpointing the exact ARV, but it should be in the neighborhood of $150K-%170K.

Thanks for any input you may have,

\ Henrik

Thanks Josh! And thanks Will for making the light bulb go off for me. Donation sent.

Josh, I just saw your status - Congratulations on another great accomplishment!

Will raises an excellent point (as always). I read this site almost daily and truly enjoy the wealth of knowledge on here. I'm constantly amazed how much some individuals are willing to contribute to the education of the rest of us. Yet, I had never thought of donating (I have no idea why).

My question is now (and forgive me if the answer is obvious - I really did look) - where is the donate button? I see the pro option, but not the donate one.

Thanks as always,

Henrik

Hi Dave,

Did you end up buying the toolbox? If so, what do you think about it? If it accomplishes what it says it will, it seems like money well spent.

Thanks,

Henrik

Since I don't yet have access to the MLS (I'm working on that), I'm using various "public" MLS sites to look for comps. However, it seems foreclosed homes are showing up as "sold" with the price being the amount foreclosed for. This makes it difficult for me to decide which properties are valid comps (since a lot of the foreclosure amounts are much higher than current sales prices).

It seems a good guideline is if the price isn't a nice round number (e.g. $142,764), chances are it was a foreclosure. But some foreclosures seem to happen at round numbers too...

What do you do to identify which prices were actual sold properties and which ones were foreclosures? Does the MLS differentiate between the two?

I haven't been able to find any lenders that do them anymore. Did they completely dry up?