All Forum Posts by: Michael Plaks

So I guessed right. 

There's a difference between seller's best interest and your best interest. Yours is absolutely owner finance. His - may or may not be owner finance. Look, no need to get defensive. I'm not accusing you of doing anything wrong. I'm simply stating the fact that your position is biased by definition, and that can very well backfire.  @Eamonn McElroy articulated this very well in the comment above, and he restated my recommendation that the seller gets advice from an independent expert and not from you. Good luck with the deal.

@Naweed Moalikyar

Neither QOZ funds nor "considerable rehab" are good as first deals. Any reason, you ask? Yes. Same reason why you probably do not want to try Beef Wellington as your first cooking project or the Grand Canyon as your first hiking route.

@Riley Schaefer

Ask the expert himself - @Yonah Weiss

Close. Correct on the 1031 side but not quite on the QOZ side. Equity does not matter.

Say you bought some property years ago at $200k. You are now selling it for $400k, with $100k mortgage balance. (Your equity is $400k - $100k = $300k, but this number is irrelevant for taxes.)

If you want to do a completely tax-free 1031, you would need to acquire another property worth at least $400k and take at least $100k in debt. No cash can touch your hands.

If you want to reinvest in a QOZ fund, you can invest an amount equal to your capital gain. In this example, it is $400k - $200k = $200k. The remaining $100k from the sale you can keep tax-free, and you cannot reinvest it into the fund even if you wanted to. (Well, you could, but without tax benefits.)

Most likely, you do not understand correctly. When you sell with a capital gain, 1031 and QOZ are two of the strategies that can provide you with tax benefits. You choose one OR the other, not both, and the choice is something that needs professional help from real estate tax experts.

@Tarik Hodzic

First, I am not an attorney, and accordingly cannot give you any legal advice. Even if I were an attorney, I would need to be licensed in your state, as civil law, including contract law, depends on the state.

What I can give you is a practical advice instead of legal advice. Even if you're able to prove in the small court that there was misrepresentation or some other sin committed by the seller and/or his agent, and the court sides with you, the real problem is how will you enforce the court's favorable decision? In other words, how will you actually collect money or otherwise force the seller to fix the problem? Enforcement/collection is your problem, not the court's.

So my non-legal advice is to move on and accept the loss. And maybe these machines can even earn you an extra dollar or two over the remaining lease period.

@Wesley Hoover

For how long is this 67-yo workaholic planning to keep making $400k salary?

More importantly - is he selling his residence where he lived longer than 2 years? If so, he may not even have a tax problem to solve.

If this is his investment property, then he might have other strategies available, besides owmer financing.

It seems to me that you're looking for arguments to convince this seller to ow-fin this property to you, instead of truly looking for his best interest. If I guessed wrong - sorry. If I guessed right - you should discuss all the details with a tax pro. Even better, connect the seller with such expert.

@Riley Schaefer

This question has been frequently discussed on this forum if you search it.

Short story: real cost seg studies (with a site visit and an engineer's report) on SFRs are usually not cost-effective, unless you have a large portfolio concentrated in one area, and the cost seg company will give you a package deal. 

The other option is a DIY software from companies like KPMG.

Most importantly: before investing in cost seg, make sure you can benefit from extra deductions, considering your mention of high income. Your currently allowable deductions could be limited.

So, seems like all 3 of us have been in agreement all along

@Jonathan Fraundor

To clarify what has already been stated here:

When you sell, you will owe taxes on "depreciation recapture" - whether or NOT you actually took it. (In the IRS language, they tax you on depreciation "allowed or allowABLE").

If you choose to not take depreciation, not only it's against the tax rules ("impermissible accounting method"), but you're shooting yourself in the foot. It's like refusing to borrow $100 from me, but still having to return it to me later, whether or not you took it. 

Take it.