Grandfather want to sell beach house

Tax, SDIRAs & Cost Segregation
7yFollow

Grandfather want to sell beach house

Gregory SchwartzBusiness Member
Rental Property Investor · College Station, TX · Member since 2016 · 1k+ posts · 1k+ votes

BP,

Not exactly an investing question, but this is my go-to place for real estate questions, hope you all can help. 

My grandfather (80 yrs old) is realizing he's a little tight on money. As a result, he's considering selling his beach house (more of a 1988 double-wide). It's worth somewhere in the range of 180-200k. My mom and her 2 sisters would like to keep the house in the family and are considering buying the house from my grandfather. I'm concerned about the capital gains taxes that he would be hit with. Is there any other option that will provide my grandfather the 180k he wants and keep the property in the family? (Seller financing isn't an option because he doesn't feel comfortable with his daughters owing him that amount of money)

Thanks

[email protected]443-812-0357
Schwartz Realty Group5118 Reviews
WebsiteView Page
0Reply
11 views

Most Popular Reply

Eric L.
Rental Property Investor · Royersford, PA · Member since 2018 · 25 posts · 19 votes
7y

@Gregory Schwartz - would he be open to cash out refinancing 80% of the home's value and adding the ladies to the deed and mortgage? The ladies can pay the PITI moving forward.

4Reply
See this reply in the discussion

12 Replies

Jump to latestLatest
  • Lance LvovskyPro Member
    Accountant · Fort Lauderdale, FL · Member since 2013 · 1k+ posts · 753 votes
    7y

    Does he live in the house or is this a second home? If he lives in it, then possibly can qualify for the exclusion under IRC Section 121. 

    0Reply
  • Gregory SchwartzBusiness Member
    OP
    Rental Property Investor · College Station, TX · Member since 2016 · 1k+ posts · 1k+ votes
    7y

    Its a second home. 

    [email protected]443-812-0357
    Schwartz Realty Group5118 Reviews
    WebsiteView Page
    0Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    7y

    @Gregory Schwartz  If it is a second home, he's probably going to have to pay capital gains on it at some point.  Does he have an accountant he works with?

    0Reply
  • Gregory SchwartzBusiness Member
    OP
    Rental Property Investor · College Station, TX · Member since 2016 · 1k+ posts · 1k+ votes
    7y

    @Theresa Harris My mom does and plans to ask her CPA about their options. I was hoping there was another option. 

    [email protected]443-812-0357
    Schwartz Realty Group5118 Reviews
    WebsiteView Page
    0Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    7y
    Originally posted by @Gregory Schwartz:

    @Theresa Harris My mom does and plans to ask her CPA about their options. I was hoping there was another option. 

     Could he make it his primary residence for a while? 

    0Reply
  • Gregory SchwartzBusiness Member
    OP
    Rental Property Investor · College Station, TX · Member since 2016 · 1k+ posts · 1k+ votes
    7y

    probably not. Not sure it makes a difference but he inherited the land about 15 years ago and then bought the double-wide that was on the land around the same time. 

    [email protected]443-812-0357
    Schwartz Realty Group5118 Reviews
    WebsiteView Page
    0Reply
  • Eric L.
    Rental Property Investor · Royersford, PA · Member since 2018 · 25 posts · 19 votes
    7y

    @Gregory Schwartz - would he be open to cash out refinancing 80% of the home's value and adding the ladies to the deed and mortgage? The ladies can pay the PITI moving forward.

    4Reply
  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    7y
    Originally posted by @Gregory Schwartz:

    BP,

    Not exactly an investing question, but this is my go-to place for real estate questions, hope you all can help. 

    My grandfather (80 yrs old) is realizing he's a little tight on money. As a result, he's considering selling his beach house (more of a 1988 double-wide). It's worth somewhere in the range of 180-200k. My mom and her 2 sisters would like to keep the house in the family and are considering buying the house from my grandfather. I'm concerned about the capital gains taxes that he would be hit with. Is there any other option that will provide my grandfather the 180k he wants and keep the property in the family? (Seller financing isn't an option because he doesn't feel comfortable with his daughters owing him that amount of money)

    Thanks

    Get a cash out loan on the house. That way he will have to pay 0 tax and your mom gets the stepped up basis when he passes away. 

    [email protected]941-914-7779
    INVESTOR FRIENDLY CPA®5241 Reviews
    WebsiteView Page
    TaxMD® | Tax Planning Software
    WebsiteView Page
    2Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    7y

    @Gregory Schwartz, Mom and the Sisters could simply gift him money each year up to the federal tax free limits.  And he could live on that.  Willing it to them upon death and the tax would go away with the step up in basis.  Certainly a solution that has the potential for much more family drama.  But one that keeps taxes at bay.  Helps him make ends meet.  and guarantees that mom and the aunts get the property.

    The 1031 Investor5137 Reviews
    WebsiteView Page
    4Reply
  • Gregory SchwartzBusiness Member
    OP
    Rental Property Investor · College Station, TX · Member since 2016 · 1k+ posts · 1k+ votes
    7y

    @Eric L. thanks, my mom and aunts really like the cash out idea.

    @Dave Foster I'll run that by them. I appreciate the creative solution. 

    [email protected]443-812-0357
    Schwartz Realty Group5118 Reviews
    WebsiteView Page
    0Reply
  • Eric L.
    Rental Property Investor · Royersford, PA · Member since 2018 · 25 posts · 19 votes
    7y

    @Gregory Schwartz - no problem. I would add that Mom and the aunties should qualify for the loan on their own and not name your grandfather on the mortgage if possible.

    The remaining 20% could be gifted as well as a down payment or gifted over time (possibly held as a 2nd lien (?)), or your grandfather keeps the 20% share.

    Since this is a 2nd home try to avoid commercial loans that some larger banks will try to push on you. They should be able to get a conventional loan with a low interest rate.

    Alternatively, how would your grandfather like to be a AirBNB / VRBO landlord ;)?

    0Reply
  • Steve B.
    Engineer · Portland, OR · Member since 2014 · 1k+ posts · 1k+ votes
    7y

    @Gregory Schwartz Dave just gave you what’s probably your best option. It might make for an uncomfortable conversation but it is the only one that exactly solves your problem assuming everyone is acting in good faith.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free