All Forum Posts by: Teague Anderson

The HOA for that condo complex is a train wreck. They're starting to get their act together, but a couple decades of deferred maintenance on the complex resulted in a special assessment above the normal HOA dues to pay for some extensive structural repairs.

This sort of thing pretty much only applies to condo complexes. Personally I'm going to avoid investing in condos in the future, because the HOA fees are so high, it's hard to refinance them, and the possibility of special assessments. The upside of condos is that they can be extremely low maintenance.

-Teague

@James R. Copeland In my case, it's better to sell when I had to pay a $25k special assessment last year, and the HOA fees cost $3600 a year. Oh, and I can't refinance, because a bad apple owner is suing the HOA. At least its appreciated nicely.

-Teague

Thanks Dave and Spencer for your feedback.

@Brent Coombs  So I'm not trying to get all of my cash back, I'm just trying to get some of it back.  If I only find one $300k property to replace the one sold during the time limit, then I would have to put all of the proceeds into the new property to avoid capital gains and I would have none of that cash in my bank account to use toward another property.

But say I refinance that property 6 months later with a 75% LTV, then I could have $225K in my bank account to use for other down payments. It's basically a work around to both avoid capital gains, and to get money in the bank for further investing that doesn't have a time limit on it.

Here's another scenario where I could use the same strategy: I sell the condo for $300k, and receive $200k in proceeds from the sale. During the 1031 exchange, I get two properties under contract for $200k each. Instead of putting $100k worth of proceeds to each for a down payment, I put down $40k for a typical LTV on one property, but the other one I take out a loan from the bank of Mom and pay cash. Six months later, refi that to pull $150k out (75% of appraised value). After paying Mom back I would have two properties with conventional loans and still have $110k in the bank to use at my leisure for another two or three downpayments.

:-) Teague

@Brent Coombs  Right.  If I sell my condo for $300k, say, and then only find one replacement property for $300k or more, then I'd be tying up all of my proceeds into that one property, but then I could refinance later to pull that equity out.  I would pay cash for the first transaction to avoid having double loan fees within a short period of time.

Hello,

I have an idea I want to run by you all.  Someone's probably already done it, but I felt clever for thinking it up... if it actually works.

I have a condo in Boulder, Colorado that I bought in 2013.  It's appreciated handsomely, and I'd like to cash it out to turn it into two or three rentals.  Naturally, I want to use a 1031 exchange to avoid capital gains.  I think it's going to be a challenge to find one good deal within the 45 day naming period, let alone two or three, so here is my idea:

If I'm only able to find one good deal during the time limit, I will buy that property entirely with cash.  I won't have enough money myself to pay cash, but I can take out a short term loan from the bank of Mom to make up the difference.  I'll close on the property, fix it up, get it rented and seasoned, and then do a cash out refinance.  By this process, I will have sold a property, bought another, paid my mom back, have cash in hand without paying capital gains, and have as much time as I'd like to search for the other deals.

I've checked with a 1031 exchanger and my loan guy, and neither of them had any red flags.  I'll be doing some direct marketing to try to drum up good deals, but I feel like this is a good way to hedge my bets.

What do you all think?

:-) Teague

Definitely check with an engineer.  I wanted to make a partial cut out of a short stem wall recently, and the engineer hemmed and hawed about it a bit.  Cutting a full door out could have a lot of affects, depending on what that foundation wall is doing.  It's most likely doable, but you'll want to know the implications and have an engineered stamped design so you're not liable if anything fails.

As for how to do it.  Once you have a design, you can hire someone.  Search for "saw cutting" on google in your local area.  Or go to home depot and rent a demo saw.  They're pretty intimidating to use, but not that bad once you get the hang of them.  You'll have to cut the wall from both sides, probably, so you'll want to hammer drill a small hole all the way through at the beginning and end of each planned cut, and then snap a line between those holes.  Then just cut along the snapped line.  Use water while making the cut to reduce dust.

Good Luck!