All Forum Posts by: Account Closed

Your Realtor will have a list of companies that sell a "Homeowner's Warranty."  They will hire a local inspector to do the inspection and then issue you a policy that says if the inspector missed anything, you file a claim for damages with them and they will pay it.  I haven't bought one recently, but in the past have paid $750 to $1250 for one.  

This might not be available in your state.  And it might be called something else.

Again, get a copy of a policy before you buy one to see exactly what it covers, and the terms.

One important issue to cover.  Look at an example of the inspector's report that you will receive.  Many of them say that if they missed something, too bad.  I have seen cases of mold in ductwork causing thousands of dollars later, and the inspector pointed out the language in his report that said all he had to do was make a good faith effort, that nothing was guaranteed.  I always recommend a warranty or policy, not just an inspection.

You might want to leave this alone.  It looks from the pictures like your building is the one that was constructed "zero-lot-line" and might be over.  If you discover a problem, you might be responsible for the solution.  Ignoring a problem sometimes is the best avenue to take.

You can't exempt $250,000 of the total capital gains.  Under Section 121 you can exempt up to $250,000 of the one-half of the total capital gains that represents the one-half that is your primary residence.  You can use Section 1031 to defer all of the capital gains tax and depreciation recapture tax on the other one-half that is the investment property.  This assumes that the two units are basically identical.

Some thoughts:

1.)  If your father just deeds the house to you, this is a gift.  The IRS taxes gifts.  Don't go there.  Not necessary.

2.)  Your father is in a unique position of being able to sell the house and not pay any taxes on the profit under Section 121 because it is his primary residence.  And he can sell it to you if you use Fair Market Value.

3.)  If you qualify for as much financing as you can, and your father takes back a second from you, with reasonable market terms for seller financing, you end up with the house, with no out-of-pocket but with mortgage payments, and your father ends up with a load of cash.

4.)  To make your monthly mortgage payments, you receive gifts of cash from your father, which will fall below the threshhold amount for triggering a gift tax.

5.)  With some of the remaining pot of cash, your father can make a loan to you, which you can use as downpayment money to get into another investment, maybe two.

6.)  When you sell the house you bought from your father, your basis will be what you paid for it, instead of what his basis would have been if he had gifted it to you, which would probably have been very low, and would have resulted in a huge Capital Gains tax.

Do some reading about the time value of money, and about real estate investing, and you will be amazed.  I suggest the chapter in my book called "Free Money" as a start.  You can do a "Look Inside" on Amazon for free.

I hope this helps.

Good Luck.

Michael Lantrip

I'm not licensed in Washington, but the Law of Descent and Distribution is very similar state-to-state.  If you have been to an attorney, you should already know these answers.

If someone died, either there was a Will or there was not.

If there was a Will the property was left to someone, or the document stated that the Executor would sell the house and the proceeds would be left to someone.  If "the person living in the house has a life estate," the Will could have left someone a Life Estate in the property.

On the other hand, if there was not a Will, then state law could have created a Life Estate for "the person living in the house" and now the heir, or heirs, are administering, not probating, the Estate, and the Court has permitted the Administrator to sell the property.

If you have not already been told this by your attorney, I'm wondering what is going on.

In any event, you cannot do anything about the Life Estate of the "person living in the house."  They either acquired that through a Will or through operation of state law, and if you buy the property, you could be responsible for the taxes, insurance, maintenance, etc. unless there is some more information you haven't shared.

What are the facts?

The wording of your late fee notice makes the late fee the same as rent, and you can collect it under the same terms and conditions as you would collect rent.  The fact that your rental agreement states that the month-to-month tenancy is governed by the rental agreement means that you are in good shape.

By the way, that sounds like a good document.

Just remember, when you accept someone else's money, under specified conditions, you assume the responsibility of a "fiduciary."

And that means that you meed to provide a written accounting upon termination.

But you probably already knew that.

Your set-up will depend on

1.) how many people are involved,

2.) how much they are contributing, and

3.) the extent of their active involvement.

If there are more than three people involved, you will reach a point where someone does not agree with the others, and can legally stop everything, unless you set it up right.

It seems like you said that you will be the driving force, and the others will just contribute capital of varying amounts.

If that is the situation, then here's what you can do.

You set up a Limited Liability Partnership, with a number of Limited Partners and one General Partner.

You and each of your friends will be the Limited Partners, with ownership of 90% of the LLP, and the percentages reflecting the pro-rata amount of your contributions.

Then you will form a corporation and the corporation will be the General Partner. The General Partner will own 10% of the LLP, receiving this in return for running the whole project.

The GP will make all of the decisions.  The Limited Partners will be prohibited from taking part in the project at all, or they lose their protection as being Limited Partners.

The protection to the Limited Partners is that they are not liable for anything concerning the LLP except to the limit of the amount of their personal contribution.

The General Partner bears all of the liability.

The LLP is a great vehicle for people who want to limit their risk but still invest in development real estate projects, and for a Developer who wants to use other people's money but still make all of the decisions and move quickly.

If you do the corporation correctly, you can effectively limit your own liability as well.

I hope this helps.

Good Luck.

Michael Lantrip

Probate absolutely does have to be done.

That will be done by the granddaughter and an attorney.  There is no other way.

You should also immediately involve a title company to start working on the title.  Do not leave this to the granddaughter.

Sign a contract with the granddaughter contingent on her being able to transfer 100% ownership.  Include a small earnest money check.  Take the contract and the check to the title company and order a title policy commitment.

This is all you can do.

But it should cover all the bases that you can cover.

I hope this helps.

Michael Lantrip