All Forum Posts by: Isaac Isaacson

I come back to Bigger Pockets maybe once every 2 years or so. And this is precisely why. This whole post and conversation is gold! Thank you all who have contributed.

In the middle of my first 1031.  Of course my 1031 exchanger referred to their attorneys when I asked these questions.  Yes, I will of course ask my tax professional as well.  I am just curious to hear what other 1031 seasoned veterans have done.  Apologies if I use any terminology incorrectly - I have a good understanding, but not so good with the terminology.

PS: my new property will be of greater loan value and property value.  One for one exchange.  I'll be putting 25% down and taking a mortgage.  Funds from the sale of the exchanged property are greater than 25%.  Trying to make sure I do things correctly and not create headaches during tax time, but also have the least amount of out of pocket expenses for the new purchase...

Which of the following are boot?

Appraisals?

Payment of appraisal fees, inspections, surveys and environmental studies are also typically considered taxable boot if they are used to obtain a new loan for the replacement property. If, however, the Purchase and Sale Agreement for the replacement property was specifically made contingent upon the satisfactory completion of these items, the Exchanger could argue that these expenditures were really for the purchase of the property and not to obtain a new loan.

My sale contract states: "This sale IS conditioned on the appraisal of the Property being not less than the Sale Price..." I would argue that the sale agreement is contingent upon the appraisal - this is completely separate from the lender requirements which happen to align with this as well.  However, the bank did order the appraisal - so maybe safer to leave off?

Inspections?

It was not my bank's requirement to have an inspection.  I did this on my own.  Simply an investor doing his due diligence.   I will keep this out of pocket, but I don't buy the argument this can't be included.  My exchanger's handout includes "agreed property inspections" under the non-boot category...

Surveys?

In this case, an elevation cert survey.  Again, I did this out of pocket - not at my banks request - because it is something I would do for any new property - regardless of whether a mortgage or buying with cash.

Insurance? / Tax?

I lump these together because I think they are treated similarly.  I think I understand the following as: you may safely use 1031 Funds to pay insurance premiums and RE tax at closing without repercussions.

Prorated property taxes, insurance payments and rents are usually considered deductible ongoing operating expenses and not part of the exchange, but the payment of these items will not interfere with the safe harbor.

Title Insurance/Closing Fees?

Do not create taxable boot.

Loan Fees/Points/PMI?

Everyone seems to agree that these are taxable boot.  I guess this includes origination fees?

Hi Chance,

In New Orleans too.  

For lender; I would recommend getting referrals from other investors in the area, and then calling each one with a list of questions in a spread sheet format.  (There was once a list available in the download area.)  Then compare the answers.  Ultimately, I usually go which a broker or specialist who I feel I can work best with.  I am willing to pay a couple hundred more for a competent team who answers emails and returns phone calls quickly.  Lose or almost lose a deal due to an inept or over-worked loan agent, and see what I am talking about!

For broker; similar as lender.  Everyone claims to be "investor friendly."  I don't know what that means.  I am already an investor; I don't need a RE agent to make my investment decisions for me.  I look more for dependability, availability, ethics, ect; and I like to know I am a high priority.  Call me high maintenance :).  Everyone likes different things in their agent.  It might take some experience to see whom you work best with.

PM and I would be happy to share some recommendations.  Also curious which neighborhoods you are shopping.

-Isaac

Welcome Damian,

I'm in NO too, and in the oil/gas business, as well as real estate investment.  Welcome to the forums.  

My best into advice would be to start reading through these forums; almost every question you can think of has probably been asked and answered a dozen times.

My second best advice would be not to believe everything you read/hear.  Amazing how quickly investment rules have changed in the last several years, and how many few professionals actually know them now a days. 

-Isaac

Contemplating selling an investment property. Can I 1031 exchange into improvements on another rental property I already own as well as use capital gains for furnishing it?

If I have already began the process of improvements/furnishing (this year) and financed some of it, can I use the exchange to pay off financing or for all of the costs?

Example: $50k gain from selling rental X. I have spent $15k renovating/furnishing rental Y - 5k out of pocket, 10k financed. If I sell X now, can I exchange the $50 towards the 5k or 10k already spent on Y? Can I exchange any towards more renovations/furnishing or other business expenses related to property Y?

Property Y is a duplex vacation rental btw.

No, I want to charge my housing authority a late fee...

I don't have my contracts with me, but I am fairly positive that there is a clause in their (HA) standard contract - that they made me sign, no less - which states I may request late fees in accordance with my tenant lease if the HA is late with payment.

Again, this is specific to my local; not sure how it works in other areas.

*My question is how do we collect late fees once they start paying again.

Call your local housing authority or check their website. My local HA has info posted on the site claiming they will begin sending payments on the 7th for October... I think mid-month may be more realistic though.

Suggestions on how to proceed for late rent payments once they do start paying?

You are lucky if you have no problems for October. I did not receive any of my section 8 rents yet for October. I called my local housing authority; they directed me to their website which claims they will begin sending payment on the 7th... I won't hold my breath as it looks like the shut down could last another 2 weeks...

My question is how do we collect late payments once they start paying again?

Jimmy,

Thanks for starting this thread.

I like to ask for seller concessions on my non-"investment" mortgages, but the max for an investment property is 2%. Is there a way to structure this as a repair escrow instead? If so, what is the maximum percent? What are any drawbacks of doing it this way?

Any other legal/ethical ways to get cash back from seller for repairs as opposed to just a reduced price?