All Forum Posts by: Jacob Sharp

Agree about the red flag Jack mentioned.  If the market has a bunch of POHs there is probably a reason that you want to know about before you purchase.  In my experience, it is easy (not suggested) to turn tenant owned homes into park owned homes.  Much harder to transition from a community of POHs to TOHs.  My guess is the market is not strong and many people in that area cannot qualify to be home buyers.  If you are planning to seller finance your entire inventory that will be a long turn around.

Sounds like I am not going to get through this without some aid from at least a CPA and probably an attorney.

Thanks for the information everyone!

I am in negotiations with the seller of a small apartment building (6 units).  The seller has owned the property for a long time and it is fully depreciated.  However, before we put pen to paper he is trying to figure out the best way to defer his tax liability.  He does not need the money from the property immediately and we have agreed to terms for seller financing that include the following:

purchase price: $140,000
interest rate: 7%
term: 15 years

If we proceed with the transactions given the above terms, what kinds of tax liability would he have?  Is there some other way we should be looking at this transaction to ease the tax burden?  

This is the first of many potential deals with this seller so I am trying to do my homework and make this first one go as smoothly as possible.

If any other details are needed, please let me know!

Thanks!

Thanks for the reply Dave!

Hello BPers!

I have a deal I am attempting to structure and I would like to be able to provide some guidance to the other party in order to make the transition easier for him.  He is a family friend and this is the first of what I hope are many deals as he unwinds his RE portfolio over the coming years.

He is selling me a small 6 unit apartment complex.  He doesn't need the money from the sale and wants to avoid the tax hit of realizing the sale by doing a 1031 exchange.  I have a commercial building that I would like to purchase and proposed to him that he roll the proceeds from the sale of the apartment building into the commercial building.  

The value of the commercial building is $1M.

The value of the apartment building is $140,000.

Is there a way for him to roll the $140,00 into the commercial building and avoid taxes under at 1031?  To clarify, I would want to structure the deal so that myself and another person were also equity owners in the commercial building.  Essentially he would be swapping his 100% owned apartment unit worth $140k for partial ownership of a $1M commercial building.

Is this possible?  What do I need to know and beware of to make this transaction go smoothly?

Any help would be appreciated!  Thank you!

@Bill Exeter I was hoping you might be able to weigh in on this!

I have 2 tenants on a lease for one of my properties.  One of the tenants is moving out.  Someone else is moving in to take her place.  Current tenants are on a month to month lease.  New tenant will only be there for a short time (3-4 months).  

Should I sign a whole new lease withe remaining tenant and the new tenant?  Can I just produce an amendment and have all of the parties sign the amendment that essentially states the old tenant is moving out and the new tenant is taking her place on the original lease?

Any input would be great!

Thanks!

I'm not sure how 1031's work just yet but I'm still learning. It sounds like i've got some time to figure that part out.  Thanks for the feedback Dave!

My co-worker has almost completely convinced me that the following strategy is the holy grail of building a real estate portfolio over time.  

My plan is this, buy another house that has good rental potential and move into as an owner occupied unit.  Live there for a year, and repeat.  I would be using a home equity loan on my current primary residence for the initial down payment and then paying that down over the course of the 12+ months I am in the new (to me) home.  After 12+ months I would repeat the process, each time renting out the property that I was leaving.  I currently live in a home that is worth about $250k and I am looking at higher margin rentals in the $100k - $125k as I get started with this strategy.  The plan would be to do this as long as my wife could stand it and then settle down with more permanent digs.  The idea with doing this is that my initial cash outlay stays low, around 5% of the purchase price for owner occupied financing.  After my wife says enough is enough, then I would start to do more traditional real estate investing where I would have to come up with a much larger 25% down payment for my purchases.  

I would plan to stay local, probably limiting my movement to the current school district I live in so my kids wouldn't be school hopping while all this is going on over the next 4, 5, 6 years or however long it takes to run its course.  

Is this strategy nuts?  Am I missing anything?  Thanks!