All Forum Posts by: Daniel Dietz

@John Boyorak how much total debt do you think they have on the 2M of properties? And does it look like individual loans or a portfolio loan? 

In general when there is high equity but existing loans a good plan might be to come up with enough down to cover their loans, and I think to cover their current taxes dues on the sale too (some don't look into that and are shocked). That way they can 'satisfy the loans' and own it clear of any mortgage and the essentially 'finaace the equity they had' to you with seller financing.

@Account Closed I would be interested in a DM too.

Thanks, Dan Dietz

@Michael Plaks could you, or others, expand on if doing 'cash out refi' ever has a capital gains tax implication?

What I am envisioning is I buy a rental for 100K and in 10 years it is worth 200K so I do a cash out of 100K at that point and use it for peronal use. I get that the interest in NOT deductible then.

Let's say I sell it one year later with that 100K cash out loan against it for 200K. Ignoring depreciation recapture does that 100K loan affect my capital gains of 100K of value at all? My understanding is that is DOES not, but just want clarity. Thanks.

What we do on ours which are long term rentals is that we have Silent Money Partners who bring 100% of the down payment, we find, acquire, manage rehab and do all ongoing property management.

We split cash flow 50-50, and also any equity growth that is realized when we refinance or sell 50-50. If we hold and sell some day (has not happened yet) the Silent Money Partner gets their down-payment back before any equity is split.

Dan Dietz

Are you thinking of having them invest for flips or rentals, and if rentals for the short term of long term? Answers will depend a LOT on those questions.

Dan Dietz

Not sure if you have read many of the BiggerPockets books, but @Brandon Turner discusses it at length in one of his book, I think the one with "low and no money down" and how he used that to buy his first apartment complex. 

There is also another technique called a Monitised  Installment Sale that is supposed to have the benefits of Seller Financing AND tax benefits, but when I looked into it it seemed way to complicated for my tastes, and I like the unusual ;-). There is a couple of guys on here that know a lot about them if you do a search.

Good questions. You might want to cross post over on the forum that has to do with Taxes too.

To my limited knowledge, if they sell to you now it will be hard for them to avoid the taxes.

From a tax perspective, my *understanding* is that it would be best for them to wait, as when an asset passed on, it gets 'stepped up basis'. Meaning if they paid 500K and it is now worth 1M and they have depreciated it all out, they would owe taxes on 1M if they sold now. If they both passed and it went to the kids, the kids new basis is 1M, in very rough terms. The kids owe no tax on passing, and sell it right away and owe no capital gains taxes.

We did get a similar guy in our town, a friend of ours, to sell when his wife passed on. The 'stepped up basis' ALSO occurs when just one spouse dies and passes their half on to the other. That way he could sell with virutally no CG taxes due. Same story, kids had no interest, but he did NOT want to seller finance. He was elderly and didn't want his kids to have to deal with the 'hassle' of getting payments for the next 30 years.

One thing you might want to look into is a Master Lease. There is a lot on here about it. You control the property with an Option to buy at a future date or event (death) at a set price (could be something like 100 times rent etc..)They still get to pass on to heir who pay no tax then sell to you at a predetermined price and pay no tax.

I have been thinking of doing similar. My thought was to do a CSS on a property that two partners and I hold in an LLC. I think the total would be around 75K of accelerated depreciation, or 25K to each of us (we use K-1s).

The same three of us also own a couple properties in an LLC made up of each of our SOLO401Ks, all with Traditional Contributions. Our equity in those also happens to be about 75K, or 25K each. We would like to roll that all over to the ROTH portion of our SOLO401Ks.

We are also all under the income limits to where we can use up the 25K limit in passive losses if needed.

My understanding is that the 25K 'loss' apiece from the CSS could be used to 'offset' the income that would added when we 'roll' the SOLO401K from Traditional to ROTH. Does that sound correct? Just in the think phase right now.

We do realize that we would be 'using up' some of the depreciation available in future years, and we are fine with that. Our thought is that those properties we would do the CSS on we would then do a 1031 Exchange once 'the depreciation runs out and buy something that would be easy to hold and pass on to heirs some day.

Good advice from @David Gotsill above.

When my (family) partners and I set up our LLCs the part we had to think the hardest on is the 'what ifs'. What if some one wants out? What is someone dies? How will things be valued if someone wants out? Can surviving heirs stay in IF they want to? How soon do they have to be paid out IF they want to leave? Etc, etc...........

Since we are family we decided that yes, an heir CAN stay in, IF they want to. We came up with a valuation ratio based on rents collected per month. We also came up with that the partnership would cash out their 1/3 of reserves right away if they want out, and we would have up to two years to refinance and pay they out their equity.

Dan Dietz

We only have a couplpe units that need them, and we actually put them in and take them out for them. We are carpenters by trade and self manage. That way we can make sure it is done right, waterproof as can be, and also no more holes in the woodwork than needed. Also a good chance to see how they are taking care of things or that need attention. They are all good, long term tenants.
Dan Dietz