All Forum Posts by: Michael Morrongiello

Also Using MLS exposure to market Wholesale Deals

Going into contract as a PRINCIPAL BUYER not an AGENT on a damaged fixer upper house. It has MAJOR damage and repairs needed. Will take a lot of Funds and bandwidth. Not too thrilled about rehabbing and renovating this one and prefer to "wholesale" the ratified purchase agreement with the seller to a builder or contractor who would be more in tune with such a large renovation undertaking. I also want to include in my purchase agreement with the seller that we have the right to PRE-Market the property for Resale INCLUDING formally listing it for sale with their permission in MLS to that it will get greater exposure to more eyeballs.

Here is what we were thinking as a clause:
Seller agrees to provide access to the property for the Buyer, the Buyer's representatives, partners, advisors, lenders, appraisers, contractors, and inspectors prior to transfer of title for more complete inspection, and repair assessments during the escrow period and to authorize and allow for the purchaser to be able to do some Pre-marketing of the property including the use of MLS and any signage to be placed on its premises.

Thoughts on the ABOVE CLAUSE and Does Anyone have a variation of the above sample clause that could be used for this purpose? (eg. specific authorization by the property owner to allow the Buyer (in contract) to be able to LIST the property for sale thru MLS) 

--Marcos
Yes we have worked with an Independent Title / Escrow company out of San Ramon, CA - call Green Escrow Services who can handle all of those types of transactions throughout NorCal and beyond.
Their web site is GreenEscrow.biz  # 925-523-3232 - ask for Kathy Lozano and you can mention my name.

Michael Morrongiello, 

Bill- All Good Thoughts..

The owner is in her 90's - and Ill
Unlikely she will find a love interest.
Just bidding time until she enters that Great Escrow in the Sky :-)

INCOME is what is driving the Sellers Decision - the income to provide care for her in these waning days. As you stated Under a CASH sale of the property she gets $1.1M maybe as the Property Sale Price- minus her $350K original property purchase price= $750K - minus their IRC section 121 exemption as a SINGLE INDIVIDUAL living in the property 2 out of the last 5 years of $250K = Leaves $500K of possible TAXABLE GAIN

At an assume 20% FED Long Term Capital Gains tax and 13.3% State of CA Tax (not to mention any Additional ACA- Affordable Care Act -a/k/a Obama Care) she would owe 33.3% of that Gain in Taxes! 
That works out to $166,500 in TAXES due - leaving her with $333,500 in AFTER TAX funds to invest and generate INCOME

This is WHY the Installment Sale is SO ATTRACTIVE to the family.
They get a HIGHER Property Sales Price
$1.4 M Sales Price - $200K Buyers Down payment = $1.2M  that they would finance as an Installment Sale. At $4,000 per month for 300 Months (25 Years).  Even if any "imputed interest" is deemed due by the IRS on those ZERO INTEREST PRINCIPAL ONLY PAYMENTS - The tax due on those payments would be spread out over 25 Years

Appreciate the reply - the negotiation is still ongoing. The CASH price (likely will be lower) and Actually its the Mom and her (2) TWO daughters who are PUSHING for an installment sale Vs a Cash purchase since they will need INCOME for Mom's ongoing care whether its in a care facility or in living with one of them. 

Seller is SINGLE - does not qualify for the IRS code section 121 $500K exemption since not married, only $250K - also units are NOT equally allocated in their size (the occupied unit is much larger than than the other 1/1 units)

Property is in the Golden State (CA) which does not recognize long term capital gains. 
Unlike the federal government, California makes no distinction between short-term and long-term capital gains. It taxes all capital gains as income, using the same rates and brackets as the regular state income tax (around 13.3%)

Benjamin - another low cost way to insert yourself into a proven network of Vendors, Lenders, ACTUAL Buyers, Sellers, etc. is thru a good local REIA - Real Estate Investors Association. One good one that has been around now for 22+ Years and is low cost but HIGH QUALITY is BAWB - the Bay Area Wealth Builders Association. Check them out or reach out to me and I will point you in the right direction.

Michael Morrongiello
Sunvest Property Solutions

Situation;  Elderly Seller bought their Triplex home for around $350K Many Many Years ago. She lives in One unit and rents out the other TWO Units. Today its value is around $1.4M +/- 
She has discovered that IF she sells for Cash she will have a significant Tax Bite on the Capital Gain at BOTH the Federal and State Levels.
She is open to doing a Seller Financed Installment sale;

EG. $1.4M Purchase Price, $200K Cash Down, Balance of $1.2M financed at $4K per month for 300 Months (25 Years) - ALL Principal payments - NO INTEREST

NOTE: if the buyer was buying for cash or obtaining Bank Financing - they would NOT agree to pay $1.4M but likely a lower price closer to $1.1M or < LESS as a purchase price.

Q- The Buyer intends to OCCUPY the same unit that the seller was occupying and then continue to rent out the other (2) TWO Units.
However IF the seller is financing $1.2M @ $4K per month - ALL PRINCIPAL - Can the BUYER Deduct any of those PRINCIPAL ONLY Installment payments of $4K per month as if they were paying on a more normal Bank Financed Loan which would carry interest ?

Reason is the buyer makes good income and would be benefit from the INTEREST DEDUCTION Write Off against their Income.
Thus is weighing whether it might be better to INCLUDE INTEREST in the seller financing or simply pursue getting Bank financing so that they can DEDUCT the interest on that Bank loan (likely with a Lower Purchase price of the property also involved)

Not sure of the Tax Implications on this QUESTION ???

FreedomSoft has been around a long time since 2010 or 2011 and the owner Rob Swanson who took it over years ago continues to tweak and enhance its features. It does a lot of what most people want to do; provides a database of their lead records, and other contacts, as well as BUYERS and SELLERS, helps you build and organize lists, create marketing campaigns,  use their phone system that your purchased #'s for INBOUND and OUTBOUND tracking and KPI's, can offshoot direct mail, automated tasks and workflow follow ups, has a built in document generator, can skip trace records and you can use their data feeds or import your own into their platform.

They have white labeled the program to other educators / promoters under various names like Freedomlogic, and others perhaps even Deal Automator (not sure)

Matthew - Thanks Good Info - sounds like this is really a "pseduo" LOC - line of credit
Its a line made available for you to use BUT with each property or project having to be individually approved....

Jay
All is well in my "neck of the vines" - The RE markets here in the Sonoma, Napa, Solano counties are WHITE HOT! (at the moment) next time you're down this way give a shout out.
I was curious about this firm and others because they may it sound so easy.
Thanks

Anyone have any experience with this lending company; Dominion Private Lending www.dominionprivatelending,com ? They claim they can approve experienced investors with a Dominion Financial Investor line of credit up to $2.5M