All Forum Posts by: Jeremy Martin

@Aaron K.

Is there no way the house my grandma gave us would count as a primary residence?

If both my brother and I lived in the house, can we both count it as our primary residence?

How long must I live in it to count it as my primary residence to qualify for the exchange?

So my grandma deeded a house to my brother and I as a gift in Oct 2018. We’re approaching the 1 year mark, and he is applying for a cash-out refinance to buy out my portion of the home.

My grandma bought the house in 2011 for $235,000, and she put some money in for improvements. My brother and I also put some money in for improvements. The house now appraised for $355,000, so my brother will be giving me half of that. The cash I receive would be $177,500.

For argument’s sake, let’s just say the “gain” is the difference in price of $120,000. Since I am paid out half, my gain is $60,000 (higher if we counted deprecation, I guess). So I would have to pay taxes on that right?

Q: Now, can I avoid taxes on this gain by applying $50,000 of it as a down payment on a house of my own, using the 1031 exchange? (The new house would be my own residence).

Q: If I can do the exchange, do I only pay taxes on the portion of the GAIN that I keep in cash? (So I pay tax on the $10,000 of leftover GAIN, and NO tax on the other $117,500 that was not a gain?)

Thanks

@Chris Mason

I thought about that, but I was worried that Vivint would charge me more to buy out than they would charge him. I’ll have to find out for sure.

In a sale situation the Vivint contract says he must pay the “Transfer Payment” to buy out of the lease if the prospective buyer (me) refuses or does not qualify to assume the lease.

There is also a “Default Payment” clause, which applies if you just stop paying the lease for any reason. I’m assuming this would apply if you just “wanted out”, which I would after we complete the sale. This price is almost 50% more than the Transfer Payment option, which only seems to be offered during a sale of the house.

EDIT: for anyone that may wonder why I don’t want to assume the lease, it seems like a really crappy deal to me; you’re locked in for 20 years (15 left in my case), and you must pay for all energy produced by the solar, whether you use it or not. You pay a lower rate than PG&E, but your rate increase by 2.9% every year. The rate in my case is currently $.168 per kWh. For any surplus energy, you must rely on PG&E to credit you through Net Metering. If you still have a surplus at the end of a year, PG&E will only pay you the “wholesale” rate of $.03 per kWh. I got the owner’s last 12 solar bills and the panels make so much energy I KNOW I would have a large surplus, which I would take a loss on at the end of the year unless I just deliberately used more energy.

Thanks, yes I understand that. That’s one thing that makes this hard to swallow.

The appraiser set the value right asking price, which was $265,000. Our offer accepted was $264k, so no room there to justify the increase out the home’s value. From my perspective, I’m straight up “buying” a solar system I didn’t choose myself, for cash (I do have the cash). I feel I can justify it to myself if we can settle on a fair price, since we really want this house. It would be really big setback to have to start looking for a new house and lose my inspection costs.

Hello folks,

I’m looking for some tips, not really on how to negotiate a number in this situation, but on how to handle the money if I reach an agreement with the seller.

I’m in escrow on a home that has 15 years left in a Solar PPA with Vivint Solar. I relied on vague information from the agents regarding the solar and didn’t do my due diligence in reading the solar contract until just before the end of our inspection period. So if we walk out of this deal, it’s my fault for losing the inspection/appraisal costs.

I do not want to assume the Seller’s solar lease (not sure why ANYONE would). In this case, the solar contract states the home owner must buy out of the lease, which I’ve calculated will cost about $30k plus tax.

To convince him to buy out, I’m considering offering to increase my purchase for the home by fair market value for a similar system, minus 30% for the Solar tax credit I will not get (Vivint got that), and minus depreciation (assumed at 5% per year for 5 years by now).

So if gave him about about $16k to “buy” the system with the house and own it... I understand that I cannot claim the solar tax credit, since the solar company already claimed that.

However, can I claim that this money went to home improvements in general, (by buying the solar system from for the house) so I can claim that on my taxes in any way? Or would the seller get to claim that when he buys it out?

Aside from being able to own the solar system, is there any other benefit I can recover from investing that money into the home purchase price? If so, would I have to keep that money separate from the “purchase price” of the home, and just give the guy a separate check?

@Trent Stone Thanks for sharing your Experience

Hi,

My wife and I found a home that we think fits our needs as a primary residence. It has most of the size/features we want and appears to be well taken care of.

We went to see it with our realtor. The moment I walked in, I could tell it was a smoker's house. This was primarily because of the think, "sweet" smell combing from a scented-oil warming that was going in the living room when we arrived. It was instantly and obviously one of those "sweet" smells that smokers use to cover their smell. I believe I also detected at least a hint of actual smoker smell underneath.

I'm so bummed out because everthing leading up to that day was going great, but as we were looking at the house, I couldn't think of anything else but the fact that the seller was a smoker.

I'm now looking at options for smoker remediation, such as scrubbing the hard floors with vinegar, replacing carpet, painting all walls, cleaning or replacing AC duct work, ozone machine, etc. We have the funds to have this work done, and I could probably do much or all of this work myself.

We did make an offer of $262k, ($3k below asking). The home disclousre said the owner only smoked outside on the back patio, and we did see a small metal bucket outside by a chair at back the corner of the house that was full of cigarette butts and empty cigarette packs (like dedicted trash bin for cigaretts that was only emptied when full). The overall impression I got from the house is that it was very clean and well maintained, and there were not obvious signs of smoker buildup and residue in side, so I am hopeful that it's true he did not smoke indoors.

Does anyone have advice or stories to share regarding smoker remediation, or signs to look for that we should walk away?

Thanks so much!

@thisthread

Hahaha! Hmmm thanks for your input, I guess. Apartments and small multi-families don’t ruin children’s lives. Crappy parents do. Now, are parents who move to a new multi-family home once per year based on potential businesses gain (and not what’s best for their child) bad parents? Well, I’ve learned, and am still learning, not to be judgmental, but that isn’t my idea of a stable home environment.

Wow, that sound ingenious and aggressive. Too bad my twenties are over and we’re thinking about children... but it gives me some ideas! Thanks

What kind of rent would be needed for a $400,000 multi family to have enough cash flow?

Hello,

My wife and I are looking to buy our first house. I own a house with my brother (deeded to us by our grandmother). My brother is going to “buy me out” by getting a cash out refinance for half the value.

Basically I could end up with somewhere between $180k to $200k in cash depending on the appraisal (we’re aware of the gift tax implications on this).

The asking price on the house I’m looking at is $265,000. The idea of dumping all my money into this house, get a 15 year mortgage, and then pay it off in like 2-4 years seemed VERY appealing. To have my first house and have it paid off so soon seemed like a no brainer.

Then my wife suggested we hold onto some cash for possible repairs or upgrades, and I though, oh... that seems like a no brained too. Then I thought, well what if there’s other stuff I should save money for, or things we wanna do before having a child (not much time for that by now, she’s almost 29).

I’m wondering if anyone has tips on a good amount to put down, or anything I’m not thinking of. Maybe keeping money for other real estate investments.

Thanks!