All Forum Posts by: Ward Dey

Two partners and I paid cash for a property and for the entire rehab. It is now nearing completion.

One partner would like to add the property to his portfolio (his first rental property). We want to refinance it into a long term loan in his name and cash out the partnership for this deal.

The After Repair Value is around $100,000. We are into the property $65,000.

There are a couple of ways I've thought about doing this:

1. Sell it to the partner for $80,000 so the partnership makes a return. Find a lender that will accept the amount of equity in the property (20% in this example) and the partner has little or no out of pocket expense.

2. Sell it to the partner for market value ($100,000) then cash out the partnership. We want to give the buying partner a larger share so he essentially has no out of pocket expense.

We want to ensure that we do everything above the board. Would love to get some schooling from you more experienced Pro's out there on the best completely legal and ethical way to structure this.

Two partners and I paid cash for a property and for the entire rehab. It is now nearing completion.

One partner would like to add the property to his portfolio (his first rental property). We want to refinance it into a long term loan in his name and cash out the partnership for this deal. 

The After Repair Value is around $100,000.  We are into the property $65,000.

There are a couple of ways I've thought about doing this:

1. Sell it to the partner for $80,000 so the partnership makes a return. Find a lender that will accept the amount of equity in the property (20% in this example) and the partner has little or no out of pocket expense.

2. Sell it to the partner for market value ($100,000) then cash out the partnership. We want to give the buying partner a larger share so he essentially has no out of pocket expense.

We want to ensure that we do everything above the board. Would love to get some schooling from you more experienced Pro's out there on the best completely legal and ethical way to structure this.

It's also helpful to know that Provo city has its own housing authority if you are focused there specifically. Everything else in Utah county is handled by the HAUC.

Hi Benjamin,

None of my current rentals have Section 8 tenants, but I have been looking into it as an option. I've met with representatives of the Housing Authority of Utah County. I recommend you reach out to them. Amber M. has responsibility for the Section 8 program there. Please feel free to tell her that I suggested you call. She is very helpful. You can get a lot of questions answered by them. I'm also happy to provide input. 

I can tell you that they do have a need, especially for one bedroom apartments.

Excellent input Dev. Thank you.

That's what I needed to know. Thank you. I'll find out. My guess is there is a lien against the potential buyer.

There is no lien on the property I currently own and am selling. The IRS issues are only tied to the potential buyer.

I just purchased a house subject to the existing mortgage. I am rehabbing and flipping it. I have two options for selling. The first is a traditional sale that cashes me out.

My long term strategy is to build cash flows. So the second option is to do a wrap mortgage for a new buyer to convert this property into a cash flow source.

I've started advertising the home as having seller financing available. I realize that most of those buyers will have credit challenges and I can work with that. One of the folks that has shown interest has had tax issues (didn't file for many years) and the IRS caught up with them. They have garnished wages, etc. I'm unfamiliar with the risks in this situation. Their income is sufficient to purchase the property (they make over $6k/mo)(the monthly PITI for them will be $1,560)

Can anyone more familiar with this tell me whether there is more risk selling to that buyer than to any other credit challenged buyer? Are there special steps I need to take because this is a tax issue rather than a prior foreclosure or other credit problem? Thanks.

We spent 10 years in San Antonio. Loved it! RE opportunities are extensive and it's a very strong economy for rentals. Outdoor recreation is limited vs where we live now (Utah). 97% of Texas is privately owned so exploring is limited. However, you are at the edge of the Texas Hill Country which is beautiful, especially when the wildflowers bloom in the spring. You are also 2 hours from the gulf coast. There are lots of lovely state parks.

Utah is the bomb if outdoor rec is important to you. There are 5 National Parks. The terrain is incredibly diverse from 13,000 foot craggy mountain peaks all the way down to sand dune deserts (that are awesome with a 4 wheeler or the like). Most of Utah is public land so you can explore almost anywhere. Real estate opportunities vary widely. Utah valley (Provo / Orem) is saturated with unsophisticated investors that drive prices way up and returns way down. You can find deals, but they are hard to find. Salt Lake valley has a lot of opportunity, especially the west side of the valley. Hard to find great deals on the MLS, but you can find them if you look hard. Better to get some agents and wholesalers working to find them for you. Ogden area has been the hottest area for RE investing. Many more low priced properties that have strong rents.

My vote is to live in Utah during the summer/fall and spend winter/spring in Texas. That's what we're working toward.

Hope that helps!

Got it. That's a great idea. Thanks William.