All Forum Posts by: Jeanne T.

I think the more significant story in the Greek economy is the possibility of another bail-in. It's been used in Cypress already and it looks like Greece is next which is causing a bank run of sorts. That strategy for bailing out banks is being floated around in the US and elsewhere in the event of another banking meltdown.

@Pete T.

It depends on what the appraisal comes back at, but assuming $180K, about $90 less on an interest only payment.

 Their basis is about $50,000. I'm waiting for appraisal, but I think it's going to come in close to $180,000. Capital gains are going to be significant, but not exactly unexpected.

No, I have two sisters and we do talk about the situation. While my parents don't need the money now, they will. The longer they keep things the way they are the less control they have over how & when the sale does happen. Medical bills are likely to eat up whatever equity they have and more. As an inheritance, that was never going to happen anyway, nor is it anything any of us expect. 

If they sold the property to a third party now they full $25,000 (not gain, actual tax) in capital gains would be due right away and then there is the problem of what to actually do with the proceeds other than stick it a bank. I've been trying to motivate them into taking out an equity loan to make improvements on the property, but that isn't working and I'm concerned they'll loose the tenant they have.

My sister's have more resources to do a more conventional purchase and possibly defer some of the capital gains, but are unwilling to take on the investment right now. I totally understand, they have families to consider. The only way I can do anything right now is with creative financing.

@Daniel Mohnkern (sorry, can't get these working sometimes)

IF it wasn't my parents' property a discount would definitely be in order, but there are other factors because it's not an arms length agreement. 

Whoops, @ mention wasn't working right.

@Jesse T. I am doing that somewhat now and I have previous job experience that was more than 10 years ago. My parents not having any previous property management experience has made it a challenge to do things. For example the mental leap from raising rent $100 was that the kids could become homeless.

Even if they did need the money, not sure that would be the deciding factor in what they chose to do. Still going to keep trying though.

@Jess

@Anthony Dooley You're right about thinking very carefully on the family dynamics. In fact that's some of the reason my sisters don't want to get too involved, that and they're pretty clueless about real estate and have other things on their plate. The rent is too low, there are some things that have to be taken care of. I'm trying to get all of those things addressed since I'm already pretty involved in the property, but so far not much success. You're right, that assessment is way off. I would research very carefully before attempting any rehab, especially ARV.

Would I buy if this wasn't my parent's home? Not at this price, however, because it is my parents home if I don't pay market value & minimum interest the tax effect for them could be a problem. I can walk away, but it'll become my problem eventually no matter what.

I should have probably further clarify a couple of things... The resistance to selling is more a matter of apathy. There are medical bills accumulating pretty quickly right now & as strange as this sounds, better the bills than the alternative. So, in their mind, the value of the house is essentially already gone. If they sold it outright now and net $100,000 plus, the money would sit in the bank and could be gone in a year. If they don't start taking care of some of the deferred maintenance on the property, they could be out of a tenant also.

For the last several years I've been doing what I can with maintenance, getting it rented, but I can't do any more without their cooperation and they have other things on their plate. As a gift or inheritance to the 3 of us children, it could be subject to look back of as long as 5+ years and I'm looking at purchasing it. Keeping 1 parent as comfortable as possible is not a problem so much as the big mess the surviving parent could be left in later.

@Brent Coombs

We might be able to justify postponing the unsecured note as a gain if not paid in full upon subsequent sale, but probably not a deal breaker. If I don't at least pay interest at 3% IRS will impute it and call it a gift. If installment gifting occurs, IRS will imply that was the intention all along and call entire gain realized. If I have to sell, they'll pay off the pre-existing mortgage no problem.

@Pete T. I know what the resistance is. The finality of it and not knowing what to do with the proceeds. As for the 3%, that is really a matter of minimum interest to avoid imputed interest, which could trigger full capital gains due immediately. Selling to me wouldn't be as final at first as outright selling the property. As for their equity, it's just as likely I would borrow it for real estate investing after a sale anyway to boost their personal cash flow, though you're right at a better interest rate or terms.

@Carl C. Pretty sure there is a federal mandated exemption for due on sale clause for sale to a child that applies.

Thanks for the replies. It helps to clarify what I'm attempting to accomplish.

Jeanne T.

Short story is that I've been taking care of various family members for quite a few years and have no income or credit. And even though neither of my parents is in any position to take care of their rental property (previous home) well, there is still some resistance to selling it outright.

What I intend to accomplish by buying parents house...

• Defer their capital gains
• Real estate investing experience for myself
• Income & credit for myself
• Get them out of property management

The terms I've worked out to buy the house... It 3BR/1.5BA 2+GA on 1 acre 1977

• Pay appraisal value (guestimating around $180,000)
• Wrap around seller financing at 3% 30 years $25,000 secured & the balance unsecured.
• Seller continues to pay on existing $34,000 mortgage
• Current tenant rents for $1000/mo (2 years)
• Expenses are taxes $3300, insurance $750, water softener $60/mo, maintenance & repairs $50/mo, miscellaneous $15/mo.
• NOI $540, Cash flow $90 (interest only first year) -$210 (PI after first year)

What I intend to do after buying the house is a bit unclear. It's a 3BR/2BA 1500sqft on 1 acre with 2+GA built in 1977. There's plenty of deferred maintenance & even though the septic works fine, it'll have to be changed to a mound ($15,000) in order to sell. Assessor says it's worth $233K and maybe it could be after a good renovation, although I think $220,000 might be closer.

I've mostly determined that selling within the year is my best bet, and keep the unsecured note in place to invest in other rental property. Does anyone see any huge gaping holes in my plan?