All Forum Posts by: Matt Devincenzo

Yes, you'll owe tax on the gain. you're well outside the two years residency out of the last five for the 121 exclusion.

You have some great feedback above from Jay and Chris, and hopefully that contact can help you out. 

In your networking/loan terms search I'd reframe your ask, because what you are asking for sounds MORE risky and therefore difficult than another request. You came here to ask for 100% purchase financing on a 6 plex, but what you actually need is 20-25% down to close that seller financed transaction. 

I would instead be looking for a shorter duration 2nd position note on your for sale and under contract sale property. You haven't shared all the numbers, but if that 2nd position note could be at 70% LTV and below and with a shorter say 12 month duration then it's comparatively low risk as opposed to 100% financing for a purchase. Combined with an additional pledge on the newly purchase 6-plex and your lender is in a much better position than the 100% financing.

A typical cross collateralization may also be able to accomplish what you need, but I would not be using the 100% financing language as it indicated more risk than what you're actually looking for. 

@Ahmed Hafez @Luis Maza welcome to the forum. It would be good to start your own topics to get better feedback since this post was started by another member with a different set of circumstances. A lot of people will probably not see these posts or respond since they're buried inside someone else's thread.

Got it, I'd first discuss with someone like @Dave Foster to understand your intent and how you demonstrate it. Next as far as the clawback, it is what it is there's nothing you can do to eliminate it. But that only comes into play if you sell the property later and don't 1031...so if that isn't the plan then I wouldn't worry about it now.

At the end of the day you never pay more in taxes than you make in income. So even if you eventually sell and do have to pay the gain 10 years from now that's only because you actually made money.

Quote from @Ellen LaVoie:

@Elizabeth Goff I'm in exactly the same position as you were 7 years ago! What did you end up doing? 

I have a considerable gain from my CA flip, if it sells/ My choices are 1) Just pay the cap gains tax and get to freely do what I want with the liquid funds. 2) 1031 Out of state and file the FTB 3840 forever.

I'm just getting started and made sacrifices to get this deal going. I worked really hard and had planned on a 1031. I didn't learn about the clawback till I started speaking with 1031 intermediaries.

Well first question is, are you eligible for a 1031? You say this would be when your flip sells...flips are inventory in an active business, not investment, so they cannot be 1031'd. So is it a flip, or an investment (i.e. rental) property?

You don't necessarily need the tenant to sign the notice to vacate, you can make your offer and include that the seller will provide the tenant a notice to vacate by XXX date. The planning here would be you need to get all your contingencies cleared, and then the seller would give the notice to the tenant. The other option is if the tenant is MTM like you mentioned, then you can sign an affidavit that you will be providing a notice to vacate as soon as you close. The loan requirement is within 60 days, so on a MTM tenant a 30 day notice still leaves time to move in. 

Some of this comes down to lender overlays and their ability to work with you on the documentation. You may need to switch lenders or find a good broker to help with the loan so they can get you past this issue. But it isn't a show stopper, you just need to get them what they need. 

It's either or in my opinion, either you charge a 'break up' fee and then you assume the liability of filling it quickly, or you don't charge and they assume the liability of paying until you can fill it. Your suggestion is a heads I win, tails you lose. If you get the fee and can fill it in 2 weeks instead of a month, then you should be rewarded for that but it should not come with an expectation that there's no downside for you and they'll pay the rent if it takes more than the month. 

I'd see what they think as far as a possible moving schedule and coordinate a reasonable solution. If they can leave the 15th of the month but pay until the 1st following, then you have two paid weeks to get someone in there after it is vacant. That should be plenty of time, especially if they are agreeable and accommodating with showing it in advance. I'd suggest the 1 month fee in that case and know I can most likely turn it very quickly and get someone in sooner than the next month. 

Quote from @John Mason:

...I plan to do light rehabs with a known contact of mine and we split the profits.

Only planning on smaller rehabs like maybe buy a 250 K house using HML and do light rehab

Recognize that everyone else want to do these too. The low risk, low capital infusion and quick exit flips will be the most competitive. So you can of course cherry pick those and stay low risk, but then you're much less likely to hit your $120K/year since you can only do as many of those deals as come up and you successfully beat the competition out on. If your objective is a given gross profit then you may be forced into doing higher risk, but less competitive and higher profit flips to achieve your goal. 

The really profitable flippers I've known/talked to have all gotten very good at their own marketing campaigns. But they have also all gotten good at dealing with more than just the cosmetic flips. That way they can better control deal flow, and also can convert more of those leads to a profit. 

DTI doesn't care how you finance something, it always counts it. If you have a seller finance note for $2k/mo and make $4k/mo then you have a DTI of 50%...it won't be on your credit report, but is a debt that needs to be disclosed.

Consistent dripping suggests (but doesn't guarantee) that the water source is consistent. Clogged gutters slowly dripping could be the source, but you don't need to upgrade them to find out. Just have them cleaned out for now and then you can see if that resolves the issue. At least that way you can feel confident that the additional leaf guards etc will truly prevent it from happening in the future. 

But since this is consistent I'd also consider an actual plumbing drain stack leak. If you have a drain stack that the 90 has cracked or worn a hole, then you could get consistent leaking at the point where it changes direction. Another could be if you have a pinhole leak in the supply line...I'd be less inclined to assume supply just because it would probably be so wet that you'd have interior damage and a much higher water bill. But I wouldn't rule it out. Thermal scan is the way to find exactly where the leak starts and then open up to see what's inside, A/C condensate line, plumbing drain, water supply...gutter overflow or even a roof leak running a rafter/truss...it could be any of those.