All Forum Posts by: Matt Devincenzo

Deal structure comes as a result of identifying an objective (rental, flip etc) and then a property you'd like to pursue. So what's your approach, and why this property vs. any of the others in the area? 

I'd advise against assuming the loan or seller financing in most scenarios...typically it is discussed because buyers think they can get something for nothing. Meaning they think they can SF at a really low DP, and not compensate the seller with a higher rate or better terms. I'm not saying that's what you're doing, but why would your friend SF to you? Their best bet is likely to sell on the open market...so why should they make less money (potentially) so you can make more? Are you able to help them make more this way? Help them reduce risk? What's their hook here...

I've sold on SF several times, so I'm not opposed. But too often the reasons aren't there.  

Typically it is binary, you either meet the 24 month requirement or you don't...there are a couple of exceptions for moving in less than 24 months which you can review here:

https://www.irs.gov/publications/p523#en_US_2023_publink1000...

Look at the "Partial exclusion" section

You aren't required to provide ADA compliant units, so you have two separate possible design accommodations. You can choose to accommodate without being obligated to make an ADA unit...

Option 1) Items that are more difficult or only of use to a specific disability could be excluded. You don't need to provide grab bars, interior or exterior ramps, wheelchair access in lower kitchen cabinets etc. You can if you want a truly ADA unit.

Option 2) There are ADA design elements that are easily implemented, low cost and don't really intrude for a non disabled tenant. Keep doors 36", or make at least one of every room type 36" doors e.g. 1 bed and 1 bath is 36" even if the rest are not. Add lever handles to doors instead of knobs. Have a roll in capable shower with a seat...this is pretty aesthetically pleasing to provide with a glass door and doesn't need to be a tub with a door. Most people wouldn't even recognize that this shower is ADA accessible it would just seem to be modern and no curb. You can do this without grab bars and its better than no ADA access...you could also include blocking in the wall for grab bars without installing them now. 

So you can make an ADA 'friendly' unit without making an actual ADA unit. 

It's a small property, and there's very possibility for a financial little upside to anyone who leases from you (no farming, hunting etc) so you're looking at annual type recreational or maybe 'off-grid' type tenant. I'd try to post on CL or FB marketplace if you want to see if anyone is interested. I'm not sure of the local job market etc, but maybe someone who wants to save on rent would pay a couple hundred a month to bring in their camper/RV/Travel Trailer to stay in the area for cheap...that's about it I think.  

First thing I see is you're close to hitting the 2 years OO for a tax free sale on any gain...obviously you don't currently have any gain, but if you can wait it out then any future gains would be tax free...it gives you some wiggle room later.

I don't know Fremont specifically that well, and local market drivers could change my perspective, but looking at the 3 year trend on sale price I think you'd do well to hold 6-24 months if at all possible. The last couple years of data are hard to point to conclusively just because so much was changing in the market, but it looks like at this point you've likely ridden the value down, and from here it is likely to rise and has started its trend back up. We're not likely to see major appreciation in the coming years, but I do think buyer sentiment will improve which will likely lead to better pricing via competitive offers vs. the current market. 

I'd see about delaying my move 6-8 months....you may see an uptick in sale prices come Spring and get out clean then. This won't cost you anything but your normal monthly housing costs for now. Then as my second option I'd plan on trying to rent for 12-24 months starting this spring if you still think that pricing isn't where you need it. Between now and then you can really crunch the numbers on rent vs. costs and decide how much negative you can stomach....at worst you still decide to sell in the spring and maybe it's a $40K loss instead of your current estimate. 

Either way I'd cross over the Oct 2024 occupied period so I could preserve the possibility of tax free gain. Maybe this turns around and you're looking at a gain in 30 months and having that available will be a big benefit.

When did you buy, what price did you buy at, and what do you think market sale price today would be? Those may help craft a plan for how to minimize the pain. 

Yes, you'll owe tax on the gain. you're well outside the two years residency out of the last five for the 121 exclusion.

You have some great feedback above from Jay and Chris, and hopefully that contact can help you out. 

In your networking/loan terms search I'd reframe your ask, because what you are asking for sounds MORE risky and therefore difficult than another request. You came here to ask for 100% purchase financing on a 6 plex, but what you actually need is 20-25% down to close that seller financed transaction. 

I would instead be looking for a shorter duration 2nd position note on your for sale and under contract sale property. You haven't shared all the numbers, but if that 2nd position note could be at 70% LTV and below and with a shorter say 12 month duration then it's comparatively low risk as opposed to 100% financing for a purchase. Combined with an additional pledge on the newly purchase 6-plex and your lender is in a much better position than the 100% financing.

A typical cross collateralization may also be able to accomplish what you need, but I would not be using the 100% financing language as it indicated more risk than what you're actually looking for. 

@Ahmed Hafez @Luis Maza welcome to the forum. It would be good to start your own topics to get better feedback since this post was started by another member with a different set of circumstances. A lot of people will probably not see these posts or respond since they're buried inside someone else's thread.

Got it, I'd first discuss with someone like @Dave Foster to understand your intent and how you demonstrate it. Next as far as the clawback, it is what it is there's nothing you can do to eliminate it. But that only comes into play if you sell the property later and don't 1031...so if that isn't the plan then I wouldn't worry about it now.

At the end of the day you never pay more in taxes than you make in income. So even if you eventually sell and do have to pay the gain 10 years from now that's only because you actually made money.