All Forum Posts by: Bob Norton

@Alecia S. I believe in cash flow and income for life.  If you sell the property with owner financing, your cash flow will end when your buyer refinances the property in a few years.  You will have a capital gain and some cash at that time, but not an income stream for life.

The good news about owner financing is that your capital gain taxes are spread over the life of the loan to your buyer.

Another option that you could consider is to refinance the property yourself to extract the equity tax free and then reinvest those funds into another rental property.

It looks like you made a great investment with this property.  Why not purchase others to create income streams for the rest of your life?

@Chris K. You only get the tax exclusion on your primary home.  So, you'd have to move into your second home (or live in it for 183 days of the year) to claim it as your primary home for two years to get the exclusion.

@Felipe Ocampo The critical step in the 1031 process is to contract with a Qualified Intermediary (QI), like @Bill Exeter or @Dave Foster before you close on your sale.  Otherwise, you don't have a 1031.  The QI sells the property on your behalf, holds the sales proceeds in escrow, and then purchases the new property on your behalf with those proceeds.  If you miss this step, then you do not have a 1031 exchange and will be paying taxes.

@Shane Clarkson You can deduct mileage and a home office on Sch E as a landlord.  These expenses are calculated the same way for Sch E as they are for Sch C.  Get the worksheets from the IRS publications and calculate your mileage and home office deduction.  Then, add these expenses as an additional expense on your Sch E.

@Jake Mires You shouldn't have a problem with your in-laws paying you back for their portion of the down payment once their HELOC closes. In essence, you are lending them funds until their HELOC closes by paying their portion of the downpayment. A simple document signed by all (you, your wife, and in-laws) acknowledging this fact should be sufficient if the IRS audits you.

@Brendan Lawrence If you pay off someone's property tax bill online, I think that would be seen as a gift. I don' think you would have any rights to collect that from the property owner.  They might happily buy you a beer.

@Bryen Blankenship You will want to also record a mortgage against the property to secure your promissory note wen you transfer title.  Otherwise, you may find that the buyer has borrowed against the property and another loan in front of yours and there is no equity left in the property.  Make sure you work with an attorney to get all the paperwork correct.

Also, you will want to make sure that the property taxes and insurance on the property is escrowed and paid by the buyer, so that you are protected from tax liens and catastrophic damage to the property.  Make sure you are named as additional insured on the insurance policies.  There are escrow companies that will collect the payments, hold/pay the funds for the taxes and insurance, and remit the net payments to you.  They charge a fee that your tenant-buyer should pay for as part of the promissory note.

By the way, if your current tenant doesn't have the down payment to qualify for a loan, how are you going to collect a 10%-20% down payment from him?

@Tom Desroches To take advantage of any first time homebuyers mortgage programs, you will have to live in the house.  If you are used to living in a situation with roommates, then the house hack may be the way to go.  You should only have to live there for one year, then you can purchase another property and fully lease your rental.

@Jesse Stemle Wait until August 2021 to get the tax free money, then repeat that with your next purchase.

@Waylon Zook To qualify for long-term capital gains, you need to hold a property for one year and one day.  To meet the two year gain exclusion for your primary residence, you need to wait two years plus one day.

@Nathan A Waggoner You should also check out any of the local REIAs in your new area.  The investors attending those meetings will have insights to the local area.