All Forum Posts by: Dennis Cosgrave

Thanks for posting that. I have one question. Did you need to get any kind of hotel permit or license to be able to do STR's? Also, do you have to collect and pay sales taxes?

It is not just extra risk. There are also additional administrative costs. The funds for improvements are placed in an escrow account and paid out as the various subcontractors complete their work. The entire improvement project has to be completed in 6 months. 

That is not a bad idea, however, I would still give her a 90 day option either way. 

In order to be a successful real estate agent, you need to be able to do it full time. The very successful agents I have known over the years worked crazy hours, sometimes 80 hours per week. Running another business makes it very difficult. It would be worthwhile to take the course and educate yourself. We are never too old to learn. As I have mentioned in another thread, if you are planning to be a REI having a license can be a detriment. It will likely cost you more than the commissions you might be saving.

You can legally move out and rent out the property before the year is up. However, keep in mind that when you move out, that is a change in use and if the property has significantly increased in value it could trigger capital gains tax which would be taxed at a rate as normal income. You will likely be unable to refinance until you have moved out and the tenant is occupying the unit. The bank will want to see a copy of the lease. 

I would get a contractor to give you an estimate on the cost to fix it up, unless you are planning on doing the work yourself. In that case, take the time to formulate a good estimate of what it will cost. At that point, you know what kind of number you are looking at. Instead of a hard money loan, you might consider severing the side lot and selling it and use the cash from the sale for the repairs. 

The simple answer is, you can’t. In order to do a 1031 exchange, it has to be an exchange of like property. You have to own the asset you are trading. Once the properties are traded, the depreciation base is recalculated which defers the capital gains taxes but does not eliminate them. 

It usually depends on how long you have owned the property. If you have owned for more than 1 year, then the rate depends on your income. If you owned the property for less tha year, the gain is taxed at normal income rates. 

If you have owned the property for a very long time and taken a substantial depreciation over the time of ownership, you will have to pay a recapture tax assuming the property is sold for more than the net book value. The rate of that tax is 25%. 

If the loan is assumable, that means the mortgage can be transferred to the new owner (at a cost of course). I suspect it is an older mortgage so the loan to value is probably quite low. The interest rate is probably not that attractive either. Most newer mortgages have a “due on sale” clause which requires the mortgage be paid off when the underlying property is sold. Get the specifics of the loan, and if you can, get a copy of the loan agreement. 

If you are serious about purchasing, you should make a full offer to purchase. If you have not already been pre approved, you most definitely include a contingency clause for financing with specific terms. Also, be sure to insert an inspection contingency clause as well.