All Forum Posts by: Jeremy D.

@Ryan Anderson I'm in the GR area too.  Shoot me a PM if you're still on BP and let's connect

I sold a property that I had owned for 2 years on August 7th and utilized a 1031 exchange transferring the funds into escrow with a qualified intermediary.  I then purchased (2) properties on August 29th with the 1031 funds.  Now almost a month later, someone wants to buy one of the replacement properties, which will result in a short term capital gain.

Can I do a 1031 exchange on this sale and roll the basis into another replacement property?  Are there any issues with this since it would be a short term gain?

Thanks!

Jeremy

Hello

I am in the process of selling a 3 unit residential investment property and would like to do a 1031 exchange on the proceeds to defer capital gains tax.  Here is what I would like to do and i'm wondering if someone can provide their educated opinion on if this is correct from a tax perspective-

I'd like to start an investment fund with the goal of raising $1M in capital to invest in mobile home parks.  I'd like to roll the $100k gain on the property i'm selling into this fund in exchange for a 10% ownership interest interest in the fund.  I will then pursue additional fund raising to raise the remaining capital, and use the fund to buy a mobile home park.  The fund will identify a new park to purchase within 45 days of selling my property and will close on the park within the required time limit.

Thoughts?

I found a 10 unit that looks interesting and am about to start exploring financing options. I have (2) SFH rentals that are paid off and would like to approach a commercial lender about doing a blanket using the SFH properties as collateral on the larger purchase. Has anyone done something like this before? Is it possible? I have a bunch of 1-4 family properties financed with residential mortgages and this is my first foray into commercial.

The deal would look like this:

10 unit purchase price = $400,000

Closing costs on loan (this is a guess) = $10,000

Market value of my (2) SFH = $100,000

Ideally I'd want a $400,000 commercial mortgage, 20 year amort, I am assuming 7% interest. When i run the numbers my DSCR would be 1.50. Using the SFH as collateral my LTV would be 80% with $10k out of pocket to cover closing costs. If the bank requires 75% LTV on a commercial i'd be fine coming to close with more out of pocket.

Thoughts?

As a rental it would cash flow $150-$200/mo including generous repair reserves. I'm going to make the offer. Thanks for the feedback.

I'll make the offer today. If accepted it will close mid-July. Repairs will be done end of August then it will go on the market. Should sell October/November.

I just bought another one from this same agent with the same strategy. It was listed at $55k and my offer was accepted at $37k. $5k of reno and the appraisal came in at $56k which i think is pretty close to the ARV. I'm keeping that as a rental though.

Not sure why he's listing at $125k. It does seem pointless. But at a purchase price of $85k with the above numbers what do you think?

List price is $125k. It's a short sale and new to the market. Listing agent thinks bank will accept $85k. It needs $6k of work. ARV is $125k-$130k.

My investment would be $95.5k ($85k price + $6k reno + $3.5k closing costs + $1k holding cost).

Net at close would be $115k ($125k ARV - $10k selling costs).

Profit = $19.5k

Thoughts? I have a bunch of rentals but this would be my first flip.

I started at 23 years old and am 32 now. First "deal" was building a single family home in the town where I grew up. I did a lot of the work myself- electric, cabinets, flooring, windows, doors, trim, etc. and lived in it for 2 years after building. I sold it for a $45k profit (tax free due to it being my primary residence) in 2007, then started investing in SFH and MFH and becoming a landlord. Fast forward to today and I'm at 35 units and growing. The key is to stay obsessed with investing and learning about your market, look at new properties every day, walk through a ton, network with contractors, title companies, lawyers, realtors, cpa's, etc. Learn from mistakes (which will happen), and never give up.

I have to disagree with your math, then i'll give my opinion of what to do. You said you have spent $169k in mortgage payments over the past 8 years. A good chunk of that is mortgage interest which was tax deductible. So, yes you paid $169k in mortgage payments but you probably saved $20-30k in federal and state income taxes.

I'd agree with @Bill Jacobsen that what you have paid so far is irrelevant to the decision.

If you sold you could walk away from the sale with $100k. You could use this $100k as down payments on a handful of investment properties as buy and hold rentals. In my area a 20% cash on cash return on a buy and hold property is very doable, so you'd be looking at $20k/yr of positive cash flow plus appreciation potential plus mortgage pay down. Then you could use that $20k/yr to buy another rental property every year to add to your portfolio. Personally, I'd do this. What you do depends on your long term goals and appetite for risk.