All Forum Posts by: Michael Couto

Thanks for this response Damian, I appreciate it! Say I do go the seller financing route, ultimately she will spread out the capital tax gain over the duration of the note? In addition, she will be making interest off the note which would help recoup some of that? Is there anyway to use the $14k tax free annual gift in this set up? Hopefully I'm thinking about this correctly.

Hi All,

It's been a while since I've been on this forum, although I am out there making moves! I have a situation where I can buy a property off of an aunt for a really good price. I want to see what options are out there to avoid her getting slammed with taxes. It is a multi family property that she uses as investment only. I would be buying it as such and don't plan on living there. She's held it for a long time and has basically fully depreciated it's cost. Sorry if some of the things I'm saying aren't completely accurate, still learning!

Here's some details:

Property Value: $280,000

Current Mortgage: $100,000

What I would buy for: $180,000

Options:

1: Sell outright. I think, even though I'm getting a deal, she would get taxed on capital gains for the market value of the property?

2. Gift. Same thing, she would get taxed on anything over the $14k annual gift limit.

3. A thought, can she 1031 the property for a better property and then put the new property in my name deferring taxes? Guessing this is a no because it will all have to occur under same name/tax id for the 1031 to be valid.

4. Is there a way to do this deal with seller financing? If so, could you give me an example?  She would probably be willing to pay off the mortgage balance and hold the whole $180,000 note for me. Is there a way to pair this where the $14k annual gift to alleviate some taxes?

All just thoughts, any input would be greatly appreciated!

Hi All, 

Looking to get some thoughts and advice here. I'm currently looking to buy a nice "two family property" as specified by the city assessor website. The property looks like it was used by the previous owner as a three family, at some point; it has two means of egress (stair well & fire escape ladder) and the electric is appropriately sub metered along with kitchen, bathroom, space heater, etc. Upon purchasing this property, I have a contingency that the city must recognize the house as a legal three family. In order to do this, I need to get a variance according to the building inspector who I spoke to. Talking to the attorney, the biggest issue the city typically brings up is parking. This property however is a corner lot and has a two car garage with a two car driveway. I was just wondering if anyone here has some good experience with this process. Is the fact that the property shows signs of being used as a three family prior along with adequate parking (I hope) a good leg to stand on? The property will be purchased vacant and does need quite a bit of rehab on the inside only.

Thanks everyone.

Thanks Justin Kovach , very informative! I appreciate it. Does anyone know what options are available if a loan were ever called other than just paying it off? Also does anyone use a DBA for advertising purposes?

@Tyler Jahnke that's what I needed to see. Thank you. 

Just to add to option 2...

I know Scott Smith had mentioned series LLC's instead of individual LLC's for each group of properties although I'm not sure if this is something I can do here, I will have to talk to attorney. This comes from the Bigger Pockets podcast 109 I believe.

I've read tons and tons of posts regarding LLC's and I understand that everyone has their own opinions and everyone's situation is different. As it pertains to me, just starting out, I was looking at starting an LLC for a few reasons but the further I dig into it, I'm not sure it's the right choice. I was hoping to get a few thoughts from more experienced investors to help me make a better educated decision.

Let me start out with the following:

-I own 1 duplex in my personal name and have a three family under contract that I plan on BRRRR'ing.

-I plan on getting an umbrella policy with the right amount of coverage for all my properties.

-I wanted to form an LLC because I felt it was best to start with the right structure from the get go as I plan on scaling. I want to make the right decision in terms of personal protection down the road once I have quite a few properties to protect my assets. I planned on 3-4 properties per LLC that I create. I also wanted to form an entity to help with some of my advertising strategy. The problem with this is all the banks automatically present commercial loan terms for smaller properties (4 units and less) when the mortgage is to be held by an LLC. The same goes for Land Trusts based on the information that I have gathered. A 4.75% Loan fixed for 30 years (personal) vs a 6+% loan for 10 years with 20 am makes a big difference.

With that being said, here are the options I see:

1) Do not start up an LLC at this time. Get the right umbrella policy and continue to buy smaller multi families in my name to take advantage of the better bank rates and terms. I do not own many other assets except the duplex I'm house hacking right now and hopefully this three family. Both will have quite a bit of equity. Down the road, if I feel it necessary, develop an LLC and do a quit claim deed into the LLC's name. Again the risk here is if the bank calls the loan and I have to pay off the mortgage...Can I refinance with another bank or switch the deed back into my name? Will this be a huge hassle?

**I understand anything over 4 units automatically forces me into obtaining commercial lending.

2) Create an LLC. Put both my properties (if everything pans out) in it along with the right umbrella policy. Pay the higher rates but have a higher level of protection (as far as I've been informed) as I scale. Put 3-4 properties per LLC and continue to repeat. This is the direction my attorney and CPA had suggested.

Sorry for the long 2nd post. Feel free to rip this post apart, I do appreciate and suggestions or feedback.

Thanks guys!

Hi Everyone! My name is Mike and I live in New Bedford, MA. I've been lurking the forums for a little while but have decided it's time to jump in and introduce myself. I'm currently working on my second deal but am still a newbie and trying to absorb as much information as possible.  My main area of focus is buy and hold of small multifamily properties around the area which I live. 

My first deal was a REO duplex that I picked up back in 2013. I completely gutted and renovated this property doing most of the work myself and am still house hacking this property today.I also currently have a great three family deal under contract that I obtained through direct mail marketing after researching strategies through BP. The house in good condition overall but will need some minor rehab. I was able to raise private funding and plan on implementing the BRRRR strategy for this property.

In the meantime, I figured it would be could to connect with other investors and to help share my early on progress with anyone else starting out.