All Forum Posts by: Ronald Perich

Leases in our area are typically one year long. Month-to-month usually yields a higher rent payment. Even with a month-to-month lease, I include a charge of $200 if they vacate before the 11th month of residency. There are so many start-up costs when renting to someone new that I feel very justified with that extra charge. It's actually too low if you ask me.

Not sure about the "sham" transaction part. This is a ten-unit complex (actually a six and a four unit on contiguous properties). So there is no primary residence to concern ourselves with.

@Don Konipol, @Gino Barbaro, @Steven Hamilton II, @Dave Foster... I want to thank you for your posts! For some reason, my Android Chrome browser doesn't play nice with the "@" symbol and I wasn't able to properly mention you at the time...

5/25 is nice because the payment is lower. Best I could find is 5/20. I do like the point that the bank might not be willing to refinance if they are in dire straits or the lending market has dried up. It happens. So just be aware that the refinancing is not guaranteed and you should always be looking for your next lending source.

Thanks Gino (@ symbol doesn't work on my phone). They want out of the game. He's retiring from his day job and they want to head out in their RV. But they're concerned about the taxes this year. Won't be much better next year because of recapture. But maybe I can lessen the burden with a correctly structure offer.

Good point on the 1031. I should have mentioned they are looking to get out of the game and I would be buying it from them. Also, this is for multifamily property they have as investment property.

I had considered finding another property that we could partner on and they would simply get an equity split but be hands-off in day to day. They want to get in their RV and just go enjoy themselves. That would be a 1031 option.

I do appreciate the ideas presented here. I'm just trying to load up the toolbox as much as I can so I can be of value to them, even if we don't do the deal. And I completely understand your advice on not getting too involved in their situation. I want and will insist they talk it over with their advisor. And will be happy to support that meeting too.

Thanks @Brian Gibbons! Always good to get the opinions of those in the know!

I'm pretty sure that a lease option will allow me to control the property this year while deferring the sale and taxes into a future date.

I'm hoping someone might have other creative strategies that will help the seller delay or defer when they have to pay the taxes. Or at least lessen the burden.

I agree you need to see every unit, but that can come as part of due diligence so dont let that stop you from offering. Assuming a $900K loan, you still cash flow $30K a year. On a 300K down payment. Is that the kind of CoC you want?

This is of interest to me as well. I will probably not hire a PM as much as an assistant within the year. Part time who would be interested in growing as the portfolio grows.

I really want to provide my seller with some options to reduce the taxes they'll pay if they sell me their property. By helping them solve their problems, perhaps I am their first choice for the sale. Here's a quick synopsis of their situation.

They've owned these units for roughly 20 years. Assume today's sale is at $300K. Originally purchased for $250K. (Yep, there is little appreciation in this area).

Improved Property basis is probably around $200K (for depreciation purposes). The biggest hit in on the recapture of depreciation (which I believe is at 25% tax rate). They have to reduce their basis by the $145,000 of depreciation they've taken over those years. So their real basis in this property stands at $105,000. Their resulting gain in the property is $195,000.

In terms of taxes, I figure their recapture taxes will be $36,250 (25% of $145) while the remaining capital gain is taxed at 20% for a bill of $10,000. 

Add to that a decent salary for the owner.

How can I help them reduce the taxes? Or maybe delay when they pay those taxes?

A master lease option (something @Brandon Turner has talked about) is not a sale until the option is exercised, right? Maybe we do that and delay the actual sale until next year (when their personal income is less)

Amanda Han talked about seller financing as another option. But I think the recapture has to be paid at the time of the sale even when using seller financing.

Perhaps they put it into an LLC and I slowly acquire ownership of the LLC. Not even sure how the taxes are figured on that one.

So I am looking for some options. I realize none of what you will offer is specific tax or legal advice and I should seek the recommendations of a qualified tax or legal specialist. Thanks for the help!