All Forum Posts by: John Brackett

Rick,

I appreciate the feedback. I would be interested in working with you to start BP network in SD. Please advise on next steps.

I want to inquire about real estate mastermind groups in San Diego or Southern California. Is anyone a member of a real estate mastermind group with productive investors and or real estate brokers? Any suggestions for groups in San Diego or Southern California? Your comments are appreciated.

I'm am looking for feedback on real estate option contracts you feel are business/presentation friendly with adequate Optionee protection clauses. Main goal is to gather feedback or sample real estate option contract samples with a brief summary how 1-3 points you like most about your specific real estate options contract. I appreciate the feedback.

Title to vest in Trust vs. LLC/entity or your name personally - less likely to trigger DOS. Regarding structure (if you have both of the scenarios below - makes decision even easier):

1) Flip - equity is driver. In other words, if you intend on flipping property then equity (profit after sale) will drive opportunity.

2) Hold - cash flow is driver. Based on above mortgage rate and term - property may be positive $150.00 per month or more. As a general rule - 1.25 DSC (income vs. mortgage payment). Another view point: if market softened and you needed to reduce your rents by 25% (or your expenses could increase by 25% before you would be in the negative).

Therefore, the higher your DSC (debt service coverage) the easier the decision - less risk to you. Analysis as follows:

Cash flow: $150.00 per month X 12 = 1800.00
Principal Reduction (equity creating from tenant paying mortgage) = 2000.00 year over your time horizon.

Total benefit: +3800.00 (cash flow + equity) year 1.

Less: -$8000.00 your investment (down payment)

Negative Benefit: -$4200.00 **** will be positive after year 3

Equity (ARV) - a bonus *** but in this case too small to count

In MOP - if benefit is positive year one (you are getting at least a 25% return on your investment) - worth the risk. In above example you would be paying $8k to take on the seller's problem.

The way to make the above deal make sense - either seller comes into the deal with cash - pays you or you come in with nothing down.

Good luck!

I would appreciate a referral(s) to an attorney/law firm in Southern California that is very versed (expert) in CA Equity Purchase laws . Additionally, an attorney or law firm that works with real estate brokers/laws governing real estate brokers in the state of California. Thank you

I think Bill's comments are spot on - additionally include in your offer an option (at minimum first right of refusal on other parcel/unit). I think you have a good value proposition to seller: I will spend my money and time increasing value of both units (- only offer to paint exterior of his/plus landscaping). In exchange - you get your asking price plus - option to.......

Hire a company to complete a property condition report - not a home inspection. Report will be more complete/detailed and usually performed by a licensed contractor or engineer. Only approx $350.00 more for this report vs. home inspection. Provide special instructions for photos or video. When you factor your time - more cost effective, plus you get the benefit of leveraging professional being accountable to report - EO insurance. Report will normally include cost to cure – one of the main advantages.

Thank you Wayne and Dave T. Thank you also for alternative proposed - selling note at a discount/escrow proceeds for 1031.

Thanks Bill – it has been awhile. Good to hear from you – thank you for the response and let me clarify per your comments:

1) Comments – thank you for summary(s) in bold; clear and concise.

2) You are interpreting correctly – I guess I want my cake/eat it too. I wanted to see if there was a way to exchange into a note from real estate (differ tax from sale of real property). I do realize not like kind, but thought I would inquire. If property is fully depreciated, gain would then be from dollar 1 to sale price correct?

3) Yes, 1031 still very viable. Still considering several properties/alternatives. I will contact you offline as we near agreement. Thank you.

Tax Question (two scenarios) - Question builds so please read all three bullet points and provide feedback:

1) Capital Gain – seller purchases a property for 40K. 20 years later property is fully depreciated and seller wants to sell for 100K. At that price what is long term capital gain? Is current rate 25%? 25K capital gain due March 15th of year earned?

2) Installment sale – wants to exchange. But is considering an offer from buyer to purchase property for 100K. Seller then carries a note for full purchase price secured by a 1st trust deed - $100K @ 5.5% interest, amortized over 30 years, due in 10 years (installment sale). What is capital gain tax consequence? Is there any – I would think so as property is fully depreciated. How would gain get paid if installment sale/or simply put what is tax to seller? 1) Are payments taxed at long-term capital gain rate? 2) Is interest taxed as ordinary income?

3) Is seller able to Exchange gain into note (note he is carrying back for buyer in scenario#2)? If so, would gain be payable when note is paid off by Buyer? How can seller exchange gain into note if at all? Any suggestions? I’m trying to work above deal and need to present some “hypothetical” tax advantages for seller to confirm with his tax guy? Any way to exchange gain into note carried back by seller would be idea (don't know if doable) or similar concept?