All Forum Posts by: Tommy F.

@Courtney Downtain   It's Houston and subtropical weather.  Anyway, if the foundation is a crawlspace the "remote" chance of any freeze would likely occur there assuming the heat is on inside. However, if the foundation vents are closed, it should be fine. If it's a slab foundation and assuming the inside has the heat on then it's fine.  

@Mauricio Perez  The house sale will not cause any capital gains taxes due unless she made over $250k profit.  As for what to do after the sale, please see a few posts I made last year on renting to parents.  There are pros and cons, and lots of valid opinions.  It's not directly addressing your question, but I hope you find it helpful.  

All the best.

https://www.biggerpockets.com/forums/52/topics/341...

@Justin C. Be sure to cleary document the purpose of the 0% interest contact is not for tax avoidance reasons. Below-Market loans fall under an IRS catchall provision for tax avoidance loans and other arrangements that have an effect on the tax liability of the seller or the buyer. In the case of the 0% loan you specify in the original post, the seller of the property may very well be subject to imputed interest. If a deferred payment contract with the selling price greater than $3,000 does not contain a reasonable interest rate then the IRS will impute a reasonable interest rate. The imputed interest rate rules prevent sellers of capital assets from increasing the selling price to reflect the equivalent of unstated interest on deferred payments which converts ordinary "interest" income into long-term capital gains. For the most part, the buyer and seller must account for interest on an accrual basis. The accrual basis is required to assure the seller's interest income and the buyer's interest expense are reported in the same tax year. Check with your tax adviser. Good luck.

@Jeff Unruh 

Mecklenburg County, NC has a very robust online tool for search tax foreclosures to include narrowing searches by property type. http://mapserver.mecklenburgcountync.gov/foreclosures/

Vacant land presents a whole host of potential problems that may inhibit a quick flip.
Sure, anything is possible. When you're looking at the land consider some of the following:
1. Is sewer or septic available? If no sewer, has the land passed perc test for septic?
2. What is the zoning of the land? What is the land use of surrounding properties? Rezoning is not a slam dunk. It takes planning, time, hearings, and more hearings, more time, and money. Go to a few rezoning hearings in your area and watch the process.
3. Is the land in the path of progress?
4. How far away is the progress?
5. Are there any underground problems like old oil tanks from houses or other problems lurking?
6. Is any part of it a wetland and/or flood plain?
7. Are there any easements cutting through the property?

Land is land, and there's not anymore being made. That being said, all vacant land is not equal and some or all of the problems above can hinder your "flip".  In my opinion, the question is what value will you add to the land that will make it more valuable and/or useful? Buying a distressed piece of vacant land to "flip" may just be shifting a problem from one person to another. All the best!

@Pat Jackson

Do your numbers work based on the current rents? Looking from a different angle, what does a bad tenant cost? Headaches, nit-picking repairs, slow rents, damage, lawn care, decline in upkeep and appearance, etc. You say the guy loves the place, takes immaculate care for it, mows the lawn (I suppose it's not a requirement), gardens, etc.  Are his current upkeep efforts a contributing factor to the purchase price? You say it's the best place in the neighborhood.  Is it because of him or the current owner?

Using your analysis of a net $820 loss of annual income, is it worth a possible month vacancy, expense of turnover cleaning, and management expense to place new tenant? If the numbers work going into the deal, I would leave the guy in place, but let him know a modest increase will occur at next lease renewal. If he's on fixed income, it will cost him more to move than pay another $10 - $20 per month. Good luck.

@Kim Horn

Depending on your particular situation, here are a few benefits that can be associated with seller financing.

Benefit = You collect a down payment and a mortgage for the balance. If the buyer is unable to pay then you regain ownership of the property.

Benefit = Seller financing (installment sales) can be a tax strategy and provide additional income to the seller. Under the general rule for computing gains and losses from the sale of property, the taxpayer recognizes the entire amount of gain or loss at the time of sale. However, the installment sales provision is to prevent hardships caused by large taxable gains thus allowing the taxpayer to spread the gain from installment sales over the collection period. So instead of paying tax on all your gain in the year of the sale, simply shift the taxes over the term of the mortgage.

Benefit = The is interest income from the mortgage. You'll pay tax on the interest the year its received, but it can be offset with other interest expense, and reduce your tax.

Good luck!

@Tina Acevedo

I circled back around to this post after seeing a couple votes.  Yes, I’m a “main lander”, and no I don’t know Hawaii. So, instead, consider the advice of Robert Kiyosaki who is Hawaiian (Reading material suggestions: Rich Dad Poor Dad, and Cash Flow Quadrant).

You've taken some risk and got in the game which more than most people. However, you asked for advice in your post, so I'm giving my perspective based on information you provided. I'm not being critical of you, so please just take this as constructive feedback. Not only are you losing $356 each month, as others stated, you're not accounting for capex, repairs, vacancy, etc. You have 2.5 years before your 5/5 ARM adjusts, let's hope the rate is not higher for your sake. Your monthly gross income from two jobs is $5,800 so after tax you're probably taking home about $50k to $53k. You're 31 years old and living for "free" with family. You have no reserves saved, but you go on to say you're seeing all this money coming in from paychecks you don't know what to do with it. That being said, how do you not have any money saved? Maybe consider giving some money to the family member who is allowing you to live for "free" and then start saving for lease turnover repairs, maintenance and cleaning in your condo. Also consider saving a few mortgage payments in case you have a vacancy period, and check your HOA financials to see how much the HOA has in reserves. You admit to having no reserves saved, so what happens if your HOA is under-funded? An HOA without reserve funds or with inadequate reserve funds = Higher Dues and/or Special Assessments. Your $356 monthly red ink can get drastically worse overnight. When an HOA is without adequate reserves and it's faced with expenses outside its normal operations budget, the HOA usually has two choices: immediately increase dues or levy special assessments. You won't see it coming if you don't look at the HOA financial statements. Some, but not all, states regulate HOA reserve funds. Those states which regulate typically require a reserve fund study to be completed every three or four years to ensure the HOA has funds and a plan to meet the anticipated repair and replacement obligations. Let's hope Hawaii regulates and your HOA is financially prepared for a large unexpected repair or a needed improvement. I'm sincerely trying to help you. Wish you all the best.

@tina you are not seeing income from rents. You are seeing negative cash flow by subsidizing your tenant's lifestyle to the tune of over $4000 per year. Your part time job is paying for your tenant to live in your condo. If the HOA does a special assessment for unexpected needs or an improvement project you will be even deeper in red. Nix the condo and find something that has positive cash flow from day one. Good luck.

@christine no, just have good insurance.

Steve Fitzgerald "...intended to be a cash flow property..." For condo and town house (1) check HOA covenants for non-owner occupied, i.e. What percentage if any units may be rented? (2) Ask for HOA financials to see amount of reserves on books (3) look for deferred maintenance on exterior and compare to HOA reserves. You don't want your numbers to work today, purchase a unit, and next month get an HOA assessment of $200 per month for 24 months to pay for HOA mismanagement in the past. Good luck.