All Forum Posts by: Stephen Chittenden

Depending upon the structure of the transaction and who is involved, there could potentially be a Form 1099-S reporting requirement here.

@Bryan Crow Because they are held in a C-corp, you will likely need a commercial note, even for residential properties. We hold our properties in an LLC, and have the same issue. You will need to make the balloon payment when the note is due. You can either do this by refinancing, selling, or using cash from another source. You have some interest rate risk because at the end of the term, you will be exposed to whatever the market rates are if you don't have the cash available to payoff the loan(s). Shop around though, you will find different products. For example, we found a local credit union that provided a 5/5-ARM. So, our rate is locked for five years, resets, and then locks for five more. At the end of the 10 years, we'll have to refinance or pay off the notes.

If you don't want to do a balloon, you can look at some of the hedge fund companies offering financing like Dwell Finance and B2R Finance. They will typically want the homes in an LLC, not a C-Corp though. They will provide 30-year fixed rate financing, but generally at a somewhat higher interest rate and with higher fees. They might also have a lower LTV cap than some local lenders would.

Good luck.

Thanks, everyone.  Sounds like I should start a side business doing HVAC installations.  Seems like a lot of labor cost.

Apparently, the A/C has gone out in one of our units in Bel Air, MD.  Got a quote for $5,200 for a 2.5 ton 14 SEER air handler and 2.5 ton 14 SEER heat pump with a 10 KW heater.  Looks like they're quoting a Trane system.  Any thoughts on this price or recommendations for another contractor to quote the job?

I have been told that you can sell those pink fixtures on eBay.  Apparently, there is a market for hip "retro" features among people without taste. ;-)

Originally posted by @Brent Coombs:

@Stephen Chittenden, who's giving out 95% conventional loans for secondary properties?

(Which is really the only thing that Lillie is asking)...

 That was 8 years ago.  I'm not sure you'll find that these days.  Maybe with a local lender somewhere.

It's impossible to say without having a good idea of the rehab costs. It looks like it needs a new kitchen and at least one new bathroom (probably two). It also appears to need new flooring throughout, new light fixtures, and paint. It looks like there may be some water damage, so you'll need to figure out if there is where it is coming from. It's impossible to tell from the photos what condition the home's mechanical systems are in or the condition of the roof. Judging from nearby listings and sales, it looks like you might be able to get $155k-165k with a full rehab. Assuming that's right, I would guess the listing price is more than you should pay for it. I'm also not sure what kind of rehab financing is available, so that may be a factor too.

This sounds like mortgage fraud to me. A second home is not a primary residence. That said, we were able to get 5% down conventional financing for a second home.

@Andre Moncur But how would you not owe U.S. income tax?

In general, the character of the income is retained through the LLC. So, passive real estate losses reported on a K-1 remain subject to the passive loss limitations.