All Forum Posts by: Justin C.

Good day BP, I have a seller who would like to sell his 2 small multifamily buildings but is nervous about the tax burden if selling both in same year.  He has agreed to owner financing.  Would owner financing spread this burden out of the course of the term?  Here is the deal:

$140k purchase

$20k down payment

$120k owner finance 5% @ 30yr term; 5yr balloon

What would your 30 second sales pitch be for this?

Thanks in advance!

 Good points, thanks Linda!

 Thank you Brian.  They very well might be trying to give themselves a way out if they don't like the deal.  To be honest, I'm simply trying to get them to contract and I can do my DD and really put the numbers in place.   Your point about a trust is how I was seeing their ownership being held.  It closes the estate and I would simply cut checks to the trust.  

I like how you said for them to basically "view" the overpayment on the purchase as their built in interest.  I'm not sure if they know its worth a lot less or not, but they aren't budging and its been on the market for a while now.  If we get further down the isle, I can run some amortization schedules and give them a purchase price that backs out this invisible interest rate. 

I've done owner financing in the past, but not at 100%.  This was the only way I was able to make the numbers work.  If I can figure out a way, then thats all that matters.  If not, o'well and at least I tried.  Thanks again for your suggestion

Well.. you didnt contribute in any way to my question, but I'll answer yours.  This is an estate.  There are 2 remaining children with families of their own.  By holding a note, instead of receiving and being taxed on a large chunk of money, they spread out this tax burden throughout the duration of the term.  Additionally, it creates an income stream for them and their families.  They also get to say they got an "amazing" sale price while sitting around Christmas dinner table.  

There are several reasons why someone would want to do this.

Hello BP!

There are (2) 4-unit buildings right in the middle of where I like to invest that are part of an estate sale.  This estate has liquidated several other larger multifamily buildings in places outside of my area and these are the last 2.  They are asking way too much money at $480k.  My initial offer was rejected, so after 2 weeks of trying to figure out a better approach, I simply came up with this:

$500,000

100% owner financing

0% interest, 30yr term

I pay all closing costs

Sellers cut buyer a check for $20k at closing

They are open to this and at these numbers, the cashflow is great at approx. $160 per door. However, they are saying the “the estate most likely wont accept this.”  I haven't responded, so i’m hoping to try and figure out a way to simplify this offer.  I'm aware of imputed interest, however that is taxed to the seller and not the borrower.

Any idea why the estate would care?  

Thank you very much in advance!

As a side note, I will also will have to split the sales price somehow as I don’t want the tax basis to jump $100k on each building.

 Thanks John.  Wasn't sure if it was much more than that.  I sent two requests for local groups so I guess thats where I need to be.  Do you use it for marketing vacancies?  Any tips?

Like the title says, I have an account but never use it.  I dont even browse it.  I did a few searches on google that all say type marketplace in the search bar and click on rentals but its beyond me somehow as I cant find it.  I "requested" two local RE groups that list rentals but is there an overall page?  I have no idea what I'm really asking honestly.  I primarily only use Craigslist and Zillow Manager.

How do you list rentals on facebook?

What great tips do you have for using facebook?

Thank you very much in advance!

Yup, I bought my first property ($17k) and renovated ($16k) with cash.  Used the equity in #1 and prospective equity in #2 to buy #2 ($36k) with a hard money lender (my attorney).  He gave me a $65k loan in exchange for liens on both properties.  Bought #3 with a straight loan from my hard money lender with 2nd position liens on #1 and #2.   (same attorney). 

At this point I established approx. $95k in lines of credit and personal loans. Basically building up my access to capital.

THEN i did the BRRRRRRRRRRR approach to #4 flat, #5 flat, and #6 flat cash out refinancing into conventional mortgages.

Up to 6 buildings / 9 units and looking at a triplex as we speak.

Thanks Bryan, this was an experimental purchase where it was virtually turn key.  We changed the locks, painted one room, fixed a banister, and installed new smoke/carbon detectors. This coincidentally is the first tenant turnover that we have so now I have some catching up to do like getting the whole our into our color scheme.  What we did this past week were items that were on our list of things to do when the current tenants moved out... just so happened it was only after 1 year of occupancy unfortunately.  They were great tenants and left the place in great condition honestly.  Even patched all the holes from pictures.

We removed one 12"x30" upper, moved a hood across the room opposite the sink so the sink and stove are across from one another. This took my carpenter half a day including the wiring.  Where the stove was there were no cabinetry and was an empty wall with a stove in the middle of it.  Now there will be a nice fridge there and the room makes sense.  Pantry was a joke honestly with 3 little shelves made of awful wood.  It now has 4 large shelves with proper trim work and looks great.  This was the other half of my carpenters day.  Total cost was $120 his labor, 48" of Romex, 1/2 birch plywood, 1x3s, and some quarter round.  The next day was a few hours in the morning moving the gas line for the stove - $60.

This is a B- to C+ property.  Now that it is painted in our color schemes, it should be simply touch ups going forward.  All other properties were fully painted prior to initial occupancy.

I guess the initial reason for my post is that even with saving 10% maintenance, 8% vacancy, and 10% CAPEX, this simply covers the general repairs. I could probably stomach one $5k expense right now, but 2 $5k expenses right now would cripple me.

Its more of an asset growth game long game than it is a cash management short game.

Cheers!

Thanks Greg, this is a point that I'm starting to realize.  Appreciation is probably the most significant part of the equation.