All Forum Posts by: Phong Lam

Hello B.P. Community! 

Hope all is well! Not sure if anyone ran into this similar situation before, but I can see that it can become a big headache for many investors if this situation arises and hopefully there'll be a resolution for this. One of my Seller clients bought a Sheriff Sale property last year on September 2018. Seller fully renovated entire property from top to bottom and we just went to settlement on it this past week. Property was sold for $249,900 with 3% seller's assistance. 

Title company told us that they needed to escrow out $25K of Inheritance Tax for this deal (but originally, they were going to escrow out $53,000), but after some complaints by me & my client, they reduced it down to $25K requirement for escrow. Although we need this entire escrow amount to be refunded back to Seller ASAP. 

Title company told us that this property was owned by 2 foreclosed owners at the time of the Sheriff Sale. Here is the problem..... 1 of the 2 foreclosed owners was deceased on 11/23/2002, so the property became owned by the surviving owner (not sure of their relationships). This surviving owner is still alive as of today. According to Title Company, this surviving owner refinanced for a 30-year ARM mortgage in 1/25/2006. Title company told us that they will request for that mortgage & to see if there was a title insurance issued when that mortgage was given in 2006. Title company already obtained the mortgage and will review and get back to us. What IF there was no title pulled at the time of the mortgage re-finance in 2006, but there should be title pulled in order for mortgage company to give out a refinance loan, isn't it? Can the surviving owner take out a re-finance mortgage even with the deceased person passed away prior to this re-finance loan taking place?

My Seller is under the impression that ALL Sheriff Sales are free & clear of everything, but how come there is such an "Inheritance Tax" wanting to escrow when my client has no relation with these foreclosed owners? Especially the deceased person in this matter. 

Given the above situation, just wondering if anyone can help advise on how we can get this issue cleared up ASAP and for my Seller to get back his entire escrow amount? Seller do not want to pay any of this "Inheritance Tax" that doesn't even belong to Seller. Not sure if there's anything that we can do to expedite or ways of clearing up this "Inheritance" discrepancy so that Seller can quickly get his funds back. Or do we just sit back and wait patiently for the title company to investigate and get back to us and hoping that they'll find something that can satisfy that Inheritance issue to release all of the funds back to Seller? 

Lots of title companies tell me that this has been going on pretty recently throughout the entire state of Pennsylvania with requiring title companies to hold "Inheritance Tax" in escrow whenever there is anyone deceased where Sheriff took over a property & Investor re-selling out the purchased Sheriff property after doing renovations to it. My in-house title company told me that this has been a big nightmare for many transactions. I'm hoping that there are ways to prevent or resolution to clearing up such issue? 

Many thanks in advance for your time, help and feedback! 

Many thanks to everyone's  invaluable advice and inputs here in this thread! You guys are awesome!!! Thanks a bunch! It is greatly appreciated! 

Hi @Brian Eastman! Thank you very much for your input as well! Greatly appreciate it! 

So when you refer to "Non-Recourse Mortgage", is that where a mortgage company gives you a mortgage that allows you to use the name of the IRA as a "Buyer's Name" for the title & mortgage? Let's say for example, IF I have $30K saved in a ROTH IRA account and then rolled that over to a self-directed ROTH IRA. I can do a 20% down conventional mortgage plus closing costs and finance 80% of the loan through a "Non-Recourse Mortgage"? And I'll have to buy the rental property with the "Self-Directed ROTH IRA Account Name"? Can I refinance this particular rental property later on and put that tax-free equity loan money back into the self-directed account to purchase more rental properties tax-free?

How about if and when the rental property needs minor repairs and so forth, do I pay the repairs with my personal funds first and just gather up a TOTAL by year's end and then reimburse myself out of the SD ROTH IRA?

And god forbid if there are situations where there is an eviction is needed and needing attorney fees to do the eviction process and so forth to get rid of the unwanted tenants, can we use our personal funds to get rid of the tenant? 

Let's say IF the Cash Flow generates $12K per year, that's all tax-free rents that needs to go back into the SD ROTH IRA, is that correct?

And once I hit Age 59 1/2 and the property grows from $100K to $500K that is held in the SD ROTH IRA, IF I sell the property by that time, the $400K capital gains would be all tax-free, is that correct?

On another note, IF I have a 100% equity on that $500K property, how can I use the equity to acquire more properties without selling the current property? Let's say if I want to just use $100K of the equity, how can I take out this money to re-invest in more properties inside the SD ROTH IRA?

Many thanks in advance! You guys are awesome with your wealth of knowledge in this forum! 

Best Regards,

Phong

Very nice! Thank you very much for the warm welcome & very quick reply, @Dmitriy Fomichenko! =)

Hello BP Community,

How are you? Hope all is well! I'm a fairly new member on the BiggerPockets.

I just have a question for you regarding how to use a ROTH IRA funds to purchase real estate properties. Since all funds and capital gains are all growing tax-free inside of a ROTH IRA account. My questions are:

1.) IF we used ROTH IRA funds to buy a real estate property. Let's say if we purchased it for $100K and we held onto that property for 20 years and it grows to like $500K. Since we initiated the sale with using ROTH IRA funds to fund the deal, would the $400K capital gains be tax-free if we choose to sell it when we hit the legal retirement age?

2.) With the above example, IF we used $30K from ROTH IRA account to fund a $100K deal to pay for the 20% down plus closing costs, and we use the investment property as a rental, would all the rental income be considered TAX-FREE when we collect the monthly rentals? Not sure if the ROTH IRA tax-free funds being used to purchase the rental property will flow down to the rental income being collected each month.

Those are my 2 main questions regarding funding from ROTH IRA to purchase real estate properties.

Thank you very much in advance for your time! 

Best Regards,

Phong