All Forum Posts by: Robert Leonard

Well, problems with your property are always something you don't want your tenants to have to deal with.  It's hard to know what's the right gift for their inconvenience?  Everybody likes a discount on the rent.  Whether it's $50 or $100 off, they will know that you are serious about taking care of your property AND making your customers happy!

Here's the scenario.  If I have $100k to exchange.  I want to buy a $200k property for $125k.  It expect about $25k of repairs & other costs.  I want to transfer the whole $100k "into" the property.  I want to borrow $50k at the time of purchase as a new first lien on the property to cover the balance owed and the repairs.  Is there anything in the rules that will not allow me to borrow against the property in excess of the balance of the purchase amount?  Is there any kind of requirement that would make me have to use a separate transaction or some other delay of time before I can access the equity by borrowing against it?

Otherwise, I could just get a loan for $30k and exchange only $70k into the property and use the remaining $30k for the purchase and repairs.  I understand that the $30k that would not be exchanged would be subject to capital gains taxes, so it would be reduced by the taxes of about $5k.  I'm sticking to simple numbers to focus on the rules for a minute.

I guess writing that out helped me get to my question: is there anything in the rules that would not allow me to borrow more than the purchase amount in a transaction that is partially paid for with a tax deferred exchange?

Congratulations for getting your license @Melissa Landry, I think it's a great move for you as an investor.  I recommend that you talk to the team leader at the KW office in Denham Springs, if that's not too far out of the way for you?  The owner of that KW franchise is the same owner of the Lafayette KW office where I have my license.  

Generally, Gary Keller, the man at the top, follows a "we are here to support your brand" philosophy.  They don't treat agents like employees, but like the independent contractors we are. It's a mutually beneficial relationship and you are free to make your own decisions what to spend your time and efforts on and they provide tons off training and broker/agent compliance to keep all matters in line with the rules when you process transactions.  I like it that way.   Give them a shot!

Glad you are here @Mike Nguyen!  I've learned a lot from the podcasts and I've made some excellent connections here too. Call or text me if you care to share your criteria and want to talk strategy.

That's a great idea @Melissa Landry! I'm friends with Richard McCray who organizes the Baton Rouge REIA/The RING. If he schedules this topic, we will probably have about 100 investors show up. I'll talk to Nathan about that idea tonight. Thanks!

For the sake of civility and to do my part for a constructive dialogue, I'll take back my calling BS.  That was provocative.

I understand the seller's net remains the same either way.  What I don't understand is, how you can create a credit and show a sales price to the bank that isn't the actual sales price.  How is that not fraudulent?  I understand that the credit can all be shown on the documents, but the fact that no money ($600k in this case) changed hands is where the problem is.  I'm not accusing you, I'm trying to understand why a bank would allow it.  I've heard of bank officers telling an investor to do similar practices to get underwriting approval, but I've always thought it was fraudulent whether or not a bank officer was involved.

Tax evasion is a serious offense that does get prosecuted.  If there are closing documents that show a seller selling a property for $6.5M and there's a credit for $600k to the buyer because of a real prepayment of that amount, would the $600k be tax free because it was not part of the seller's net at closing?

What does any of this have to do with Keller Williams?  That's mighty petty of you.

So explain.  If the sales price is $6.5M how is it that the seller doesn't have to deal with that $600k difference in the sales proceeds?  How does that not effect what taxes are owed?  Do they just tell their accountant, we only put that credit on the transaction to save the buyer's out of pocket costs for his financing?  How is it reconciled?

I don't claim to know it all.  Maybe everybody should get smart and when they find an undervalued property, just tell the lender, I'll take a credit from the seller for 20% even though I'm really paying him 80% for the property and I've met my requirement for the 20% down payment?  What's the difference in what you are suggesting?

Are there any other houses for sale in your neighborhood?  What are the prices?  Call one of those agents who has listings in your neighborhood or nearby.  If you don't want to deal with a REALTOR, I don't know why you would want to deal with a wholesaler?

You haven't mentioned if there's a mortgage involved or if you are facing foreclosure?  Why do you need to sell fast?  I think you need the help of a real estate professional.  If you don't know your market well enough to know your property value, you are at a terrible disadvantage - IMO.

I wouldn't touch new construction as an investor.  I think that only makes sense as a builder/investor.  Otherwise, you can't buy under value like on preexisting houses.

I have a brother who lives in Oldsmar seasonally.  He is a thoroughbred race horse trainer.  He just left and moved back up to Ohio.

I don't know what your financial picture is, but I would consult my CPA to see just what the tax hit will be on that capital gain.  It may still be worth it to pay the taxes and cash out of that property while the value is there.  Something seems abnormal for rent rates to be that low for properties at that value?

The way I see it, you have about $100k, (if your value is right) that's not earning anything for you.  $1200-1400/month income on a $200-250k property is not something to hold onto.  

Have you looked into the 1031 exchange?  There are substantial fees and the time restrictions to find your next deal to exchange into.  Those rules make it a challenge to avoid buying something you wouldn't buy if you had more time. The taxes won't be due if you don't 1031 it, until April of next year.  You could do a lot of things between now and then with the full amount of your sale proceeds.  Just be sure you have the funds avaialable for whatever taxes are due.

You caught a nice swing in the market and nobody knows where the top is?  I would take those chips off the table and cash in! No tax advice here, just a few ideas.