Take the plunge and buy or walk away?

[Francesco Barbati]

Hi everyone,

I have a two part question to ask and I highly appreciate everyone's opinion.

My wife and I are buying our first property in Boca Raton, FL. The money was lent to us at no interest (a total of $224K) which is nice! We found a 3/2 townhome that listed at $195K and we're getting it for 190K.  We originally offered $182,500 but the owner counteroffered at $190K bc the previous contract (which fell thru)  was appraised by the bank it at $190K but we have no proof of this. Our max was $188 so each agent agreed to give us $1k each from their commission to us.  The community has a 20% cap on rentals which is at capacity now so we'll live at the property until we can rent it, possibly for one year. Once we are able to rent it, we can get up to $2,100/mo. Here are the two questions:

1. The inspection was done today and the inspector recommended we asked for a $2k contingency since he found moisture on a wall near a window and there's a possibility of mold. The owner of the property is hard headed and my realtor thinks it's a bad idea. How do I proceed?

2. Assuming we go forward with the purchase, should we use the remaining cash to renovate the property?

Thanks in advance!

[John Thedford]

@Francesco Barbati

The IRS may impute interest on the lender meaning they may have to pay tax on interest even if they received none. I believe the threshold is $10,000. I have an attorney friend that loaned his daughter a lot of money through the years. In his last audit, he got hammered HARD with imputed interest calculations which meant he had to pay tax plus penalties and late fees on interest he never received. As to your deal, I don't see any bargain. You make your money when you buy.