All Forum Posts by: Jay Gibbs

Are you saying that the purchase of these properties along with the expenses for the renovations have to go on my personal taxes? Neither property has been rented because they  are still currently being renovated. 

Hello Everyone,

I have a tax question that has been bugging me because I cannot get a clear answer. So in 2021 my partner and I purchased 2 properties in our personal names on behalf of our business. Our business also has 2 other partners which makes it a total of 4 partners (partnership LLC). We could not close on these 2 properties in our business name for reason I will not get into at the moment, but here we are with these 2 properties. Our loans are held with a Hard money lender, so the loans do not show on our personal credit report. The down payments were paid with business funds as well as the renovation cost. We were unable to complete the renovations in 2021 and plan on selling both properties in 2022. My question is, since we purchased these 2 properties in our personal names on behalf of the business, can these purchases and renovation cost be claimed on our 2021 business tax return? Or does this information has to go on our 2021 personal tax return? Can someone help with this?

Hello Everyone,

I have a tax question that has been bugging me because I cannot get a clear answer. So in 2021 my partner and I purchased 2 properties in our personal names on behalf of our business. Our business also has 2 other partners which makes it a total of 4 partners (partnership LLC). We could not close on these 2 properties in our business name for reason I will not get into at the moment, but here we are with these 2 properties. Our loans are held with a Hard money lender, so the loans do not show on our personal credit report. The down payments were paid with business funds as well as the renovation cost. We were unable to complete the renovations in 2021 and plan on selling both properties in 2022. My question is, since we purchased these 2 properties in our personal names on behalf of the business, can these purchases and renovation cost be claimed on our 2021 business tax return? Or does this information has to go on our 2021 personal tax return? Can someone help with this?

@Paul Welden @Andrew Postell I was able to find it in fine print. Please see below….

“Standard 203(k) Financeable Mortgage Payment Reserves

A Mortgage Payment Reserve refers to an amount set aside to make Mortgage Payments when the Property cannot be occupied during rehabilitation. A Mortgagee may establish a financeable Mortgage Payment Reserve, not to exceed six months of Mortgage Payments. The Mortgage Payment Reserve may include Mortgage Payments only for the period during which the Property cannot be occupied. The number of Mortgage Payments cannot exceed the completion time frame required in the Rehabilitation Loan Agreement. 

For multi-unit properties, if one or more units are occupied, the Mortgage Payment Reserve may only include the portion of the Mortgage Payment attributable to the units that cannot be occupied. To calculate the amount that can be included in the Mortgage Payment Reserve, the Mortgagee will divide the monthly Mortgage Payment by the number of units in the Property, and multiply that figure by the number of units that cannot be occupied. The resulting figure is the amount of the Mortgage Payment that will be paid through the Mortgage Payment Reserve. The Borrower is responsible for paying the servicing Mortgagee the portion of the Mortgage not covered by the Mortgage Payment Reserve.”

@Paul Welden thank you so much for your insight and knowledge. I've been asking around for a bit and no one seemed to know the answer, not even loan officers. This is a huge help and I will definitely let me lender aware of this information. Is this considered an FHA guideline? Is this an entitled right for a borrower utilizing FHA 203k in this instance? Or is it totally discretionary for the HUD consultant to make that decision?

@Andrew Postell thank you for your clarification! I had some additional questions about the HUD consultant in the above paragraph. Just wondering if it's a borrower's right to have 6 months of mortgage payments rolled into the loan in this circumstance. Or if it's totally discretional for the HUD consultant to approve it?

@Andrew Postell Thank you so so much for your insight! I really appreciate you taking the time to explain the process to me. I honestly may have to walk away from this deal because it’s too extensive and costly, especially when it come to me having to make monthly payments without living there for an extended period of time. 

Wow this is great insight! To be honest, with a total gut rehab, I’m sure the property will not be habitable in 60 days especially with a multi family property. Do lenders take situations like this into consideration and extend the move in date?

Hello Everyone,

I'm thinking of doing an FHA 203K loan for a 2 unit building to convert it to a 3 unit building. This is going to be a full gut rehab on the entire building. The renovations are going to take anywhere between 8-10 months. My question is, will I be required to make monthly mortgage payments during the renovation period? Or are those monthly payments deferred until renovations are complete? This will be a huge help if someone has insight on this.

@James Galla thanks! Will the same steps apply if I needed to seek an investor? My father-in-law indicated that he wants his cash up front, so the seller financing option would not work.

Hello all,

I am currently in a delimma with a potential purchase of 2 unit apartment building. I just recently purchase my first property earlier this year back in March as my primary residence, so I am relatively new to real estate. A few weeks ago my father-in-law indicated that he would be interested in selling me his 2 unit apartment building that he owns free and clear. After doing some research, the only way that I can purchase the property is through selling financing or an investor who wants to act as the bank and give me a loan with a term. I am curious to learn more about either option because I have no experience, could anyone give me some guidance??