All Forum Posts by: KC Pake

Has anyone here ever donated real estate for tax benefits? I’ve heard that donating property could come with some pretty nice tax perks, but I’m also curious about potential pitfalls or surprises.

So, if you've gone down this path, I’d love to hear from you!

Thanks,
KC

0 Votes

Quote from @Brady Hauch:

Hey all,

I'm looking into assuming the mortgage on my sisters house and am struggling to figure out how to finance the equity that I would have to come up with to make the deal work. Some details on the deal below:

Mortgage rate on the property: 3%

Monthly mortgage payment: $1200

Amount owed on mortgage: $230K

Current property value: $370K

Equity: $140K

Due to the low mortgage payment and high rent potential in this neighborhood I would like to assume this loan and rent this property out as a long term rental. I am trying to see if the numbers still make sense to do so after financing the equity portion that I would owe my sister.

Any thoughts on how I can finance the $140K in equity I would owe my sister? I tried speaking with several lenders and they were unable to help me with the deal. Any advice/ suggestions would be much appreciated!

Thanks,

Brady

Hi Brady,

It sounds like a great opportunity to assume your sister's mortgage given the favorable rate and the rental potential. Here are a few options you might consider:

Home Equity Loan or HELOC: If you own another property with sufficient equity, you might be able to take out a home equity loan or a home equity line of credit (HELOC) to cover the $140K. These loans typically have lower interest rates than personal loans.

Personal Loan: While this may come with higher interest rates, it’s an option if you don't have other assets to leverage. Check with various lenders to compare rates and terms.

Private Lender: Sometimes private lenders or hard money lenders can be more flexible with their terms. They often look at the property value and potential rather than just your credit score and income.

Seller Financing: You might be able to work out a deal with your sister where she finances the $140K equity portion. You could pay her back over time with interest, similar to a loan. This would avoid dealing with traditional lenders altogether.

Partnership: Consider bringing in a partner who can provide the $140K in exchange for a share of the rental income or future appreciation.

Cash-Out Refinance: If you have another property, you might be able to do a cash-out refinance to pull out the necessary funds.

Best of luck!
KC

1 Vote

Saint Paul, Minnesota

Quote from @Christopher Brown:

Hello, I am looking to assume two properties. Owner is just done with them. I have two properties my self right now. Her loans are a VA and fha loan. What can I expect moving forward?

Hi Christopher,

Two additional properties with existing VA and FHA loans sound like a great opportunity, but there are several factors to consider. Both VA and FHA loans are assumable, though the process and requirements differ. To assume a VA loan, you'll need to be eligible for VA benefits, though some lenders may allow non-veterans to assume the loan. FHA loans are generally more straightforward, with lenders typically requiring verification of your credit and income.

Be prepared to provide financial documentation, as the lender will need to ensure you can manage the additional mortgage payments. Depending on the equity in the properties, you may need to provide a down payment or negotiate terms with the current owner. Verify the interest rates and terms of the existing loans, as favorable rates can be beneficial, while higher rates might prompt you to consider refinancing later.

Assess the condition of the properties thoroughly, especially since the owner is "done with them," which might indicate deferred maintenance. Factor in the cost of property insurance and taxes, as these expenses can impact your cash flow. Given the complexities involved in assuming multiple properties with existing loans, consulting with a real estate attorney might be wise. They can help you navigate the process and protect your interests.

Best of luck!

0 Votes

Quote from @Tristian Kwon:

Is there anyone that could review this creative finance deal for a 4/5 unit property and provide any feedback? My VA loan fell through and need to find alternative funding ASAP please help.

-Buy the property for 715k (It appraised for 700k)

-325k loan on the property with 390k equity

-SubjectTo Finance the 325k and take over the mortgage/deed

-Seller finance the 390k equity at 0% interest for 2 years and 6% interest for 13 years with a 20k down payment paid over 6 months. (The 2 years allows me to house hack for free since I am stationed here for 2 yrs

Pre-context:

-VA funding fell through at appraisal because he had non permitted renovations and was using the property as a 5 unit

PM me for more info

Thank you!

Hi Tristian,

Your creative financing deal looks interesting, but there are a few points that you might want to consider or clarify further:

Property Appraisal: Since the property was appraised for $700k and you're buying it for $715k, you're already $15k over the appraised value. This might affect your equity position and future refinancing options.
Subject To Financing: Taking over the existing $325k mortgage is a common strategy, but make sure to thoroughly review the terms of the existing mortgage. Some lenders have clauses that could trigger the due-on-sale clause if they discover the ownership transfer.
Seller Financing Terms: The seller financing terms seem favorable with 0% interest for the first 2 years. However, ensure that the transition to 6% interest after 2 years is manageable with your projected cash flow. Have you run the numbers on how this will impact your finances in year 3 and beyond?
Non-Permitted Renovations: The non-permitted renovations and use as a 5-unit property are significant concerns. These could lead to issues with zoning, future appraisals, and insurance. It's crucial to address these before proceeding. You might want to consider negotiating with the seller to resolve these issues as part of the deal.
House Hacking: Living in one unit and renting out the others can be a great way to cover your mortgage and build equity. Just make sure that the local zoning laws and HOA (if applicable) allow for this arrangement.
Down Payment Terms: Spreading the $20k down payment over 6 months can ease the upfront financial burden, but ensure you have a clear agreement with the seller on this timeline and any penalties for delayed payments.

Best of luck moving forward,
KC

0 Votes

Providence, Rhode Island

Quote from @Daniel Cerda:

Hello my name is Daniel Im interested in a house that the seller is selling with a land contract. I would like to know if there is a way that I could sell the house before it is completly paid off. I have been told that with this type of contract as a buyer I don't get the deed to the house until it is completly paid off. I want to buy it as a rental property keep it for a few years then sell it. I read some where that I could sell the house to a 3rd party if I do a double closing and pay the owner what is owed to him and take my profit at the same time. I wanted to know if anyone has done this before.

Hi Daniel,

How much is the seller asking for the land contract? There are options but numbers are the name of the game.

Regards,
KC

0 Votes

Quote from @Craig Barragry:

My wife and I bought an investment property in 2021 that currently has an All In One (AIO) loan that we've used like a HELOC to buy other investment properties. The AIO is our only debt on the property and is in our personal name (not an LLC) as a requirement of the loan.

We are looking to do an extensive addition/remodel on our personal home, and given current rates, we are considering using the AIO loan to help pay for it.

Are there any tax implications or other considerations if we use this loan for our personal home project? Appreciate any insights!

Hi Craig,

When considering using an All In One (AIO) loan—similar to a Home Equity Line of Credit (HELOC)—from an investment property for renovations or additions to your personal home, several tax implications and practical considerations arise. Under the Tax Cuts and Jobs Act of 2017, interest on such loans is typically deductible if used for buying, building, or substantially improving the taxpayer's home that secures the loan. This means if your AIO loan funds are directed towards significant improvements of your personal residence, the interest may be deductible. However, it's crucial to differentiate between capital improvements, which can affect your tax situation and potential interest deductibility, and mere repairs or maintenance, which do not.

Furthermore, the mortgage interest deduction is capped at interest on up to $750,000 of debt, a threshold that encompasses both your primary mortgage and any additional secured loans. Utilizing your AIO loan for personal projects also introduces risks, especially since it's tied to your investment property. Such a move could affect your ability to secure future financing by impacting your debt-to-income ratio and overall credit utilization. Additionally, since the loan is in your personal name, not an LLC, there might be increased personal liability concerns.

Given these complexities, you should discuss them with a tax professional. They can provide tailored advice based on your specific financial and tax situation, helping you navigate the potential benefits and pitfalls of using your AIO loan for home improvement purposes.

Regards,
KC

0 Votes

Quote from @Kevin S.:

1. Property management(company). Especially the first one where you don't have enough properties to hire one and you don't want to do it yourself bc you're busy with either your W2 job or your business.

2. Not knowing the market enough. In terms of demand, appreciation, changing neighborhood(affects the value of your property) etc.

Kevin,

I understand the challenges of managing your first property and getting to grips with the market. Here is some insight from my experience...

Property Management: If you're juggling a busy schedule, consider starting small. This way, managing the property yourself might be more feasible than you think. Also, there are affordable property management options out there designed for investors with just a few properties. Local real estate groups can be a great resource for recommendations.

Market Knowledge: Dive into local real estate meetings and online forums to soak up as much as you can about your area of interest. Use online tools for insights on trends and values. Learning the market is a step-by-step process, and every successful investor started where you are.

Stay engaged with the community, and don't hesitate to lean on others for advice. Post questions on BiggerPockets and build your network to help stay motivated. You're on the right track!

All the best,
KC

0 Votes

Quote from @Tom Linehan:

Quite honestly, just not sure where to start. I have been working in commercial real estate for a few years too but when it comes to diving into my first investment, I am feeling overwhelmed. I am from North NJ so very expensive locally and not sure what type of investment to get into out of all the options. I have a lot of cash ready to deploy just not sure where to begin.

Tom,

Totally get how you're feeling – jumping into your first investment is daunting, especially in a place with price tags like North NJ! But, with your background in commercial real estate, you've got a head start. You know the ropes more than you think. Why not tap into your network? Chat with some friends or coworkers who've been in your shoes. Since you've got the cash ready, maybe look into areas a bit further out where your money could go further, or possibly look to partner with somebody who has some experience and is short on capital. It's all about taking that first leap. You've totally got this. Dive in!

All the best,
KC

0 Votes

Hi BiggerPockets Community, Specifically Our Rookie Real Estate Investors!

I'm curious to know, what's the number one thing holding you back from closing your first real estate investment deal? Whether it's financing, finding the right property, understanding the market, overthinking the process, or something else, I am interested to hear your experiences and challenges.

0 Votes

Multi-Family and Apartment Investing

Post: Seeking Advice on Structuring Seller Financing

KC Pake

Lender

Pro Member

Posted March 05, 2024 11:08

Investor
Orange Park, FL
Posts 169
Votes 105

Quote from @Jeremy Anan:

Hello BP community,

I'm currently in the process of potentially purchasing a multifamily property, and the seller has indicated they're open to seller financing. This is an intriguing opportunity for me, but I'd like to gather some insights from those who have experience with this type of transaction.

Specifically, I'm curious about:

1. Strategies for structuring seller financing deals in multifamily real estate.

2. Key terms and conditions to negotiate to ensure a fair and beneficial agreement for both parties.

3. Any potential pitfalls or challenges to watch out for in seller financing transactions.

4. Are there any specific calculators or tools you recommend for analyzing the financial aspects of a seller financing deal?

If you have experience or insights to share, I'd greatly appreciate your input.

As always, thank you in advance for your assistance!

Hi Jeremy,

Below is a BP thread with some great insight on Seller Financing & a Checklist that provides a nice overview.

Seller Financing - BP Thread

Regards,
KC

4 Votes

Chicago, Illinois

All Forum Posts by: KC Pake

KC Pake has started 17 posts and replied 166 times.

Post: ❓To Donate RE, Or Not To Donate RE - That Is The Question!🤔

Post: Financing Equity from Assumable Mortgage

Post: Assuming two loans

Post: First creative finance deal

Post: land contracts and contract to deed

Post: HELOC/AIO for Personal Use

Post: What's Holding You Back from Your First Real Estate Investment?

Post: What's Holding You Back from Your First Real Estate Investment?

Post: What's Holding You Back from Your First Real Estate Investment?

Post: Seeking Advice on Structuring Seller Financing

KC Pake has started 17 posts and replied 166 times.

Biggerpockets Logo Post: ❓To Donate RE, Or Not To Donate RE - That Is The Question!🤔

Biggerpockets Logo Post: Financing Equity from Assumable Mortgage

Biggerpockets Logo Post: Assuming two loans

Biggerpockets Logo Post: First creative finance deal

Biggerpockets Logo Post: land contracts and contract to deed

Biggerpockets Logo Post: HELOC/AIO for Personal Use

Biggerpockets Logo Post: What's Holding You Back from Your First Real Estate Investment?

Biggerpockets Logo Post: What's Holding You Back from Your First Real Estate Investment?

Biggerpockets Logo Post: What's Holding You Back from Your First Real Estate Investment?

Biggerpockets Logo Post: Seeking Advice on Structuring Seller Financing

Post: ❓To Donate RE, Or Not To Donate RE - That Is The Question!🤔

Post: Financing Equity from Assumable Mortgage

Post: Assuming two loans

Post: First creative finance deal

Post: land contracts and contract to deed

Post: HELOC/AIO for Personal Use

Post: What's Holding You Back from Your First Real Estate Investment?

Post: What's Holding You Back from Your First Real Estate Investment?

Post: What's Holding You Back from Your First Real Estate Investment?

Post: Seeking Advice on Structuring Seller Financing