*** Official Real Estate Forum *** (2 Viewers)

[Sabertooth]

I have a question for those in the REI business.

I bid on the property above, it's a repo. The bank countered that at about $500 more (my realtor included for them to show clean title on it and some other small stuff). So now I have a counter offer of $19000 on the place. I confirmed to my realtor over the phone that I accept the counter.

Is the property as good as mine right now? Before I sign the counter? I mean can the bank for instance receive a bid this morning for $25k and pull the rug out from under me? Should I take off of work to go down and sign the counter? At what point is their a binding contract entitling me to the property?
My brother has a guy he works with who mentioned this exact property. He wants it for his daughter. The daughter and the guy's wife love the place. This co-worker told me brother he was going to submit a bid of $30-33k on the property. Assuming I get my deal closed, can I instantly turn around an sell this property to this other guy? What is the best way to do this? I am assuming I can't skip title. But could we do something where we all meet at the title office and do a double transfer? Is this legal?
For tax reasons, is this the best way to go about this? Mind you I want the property either way. On a flip I figure I could make $20-$35k on it. But if I can get $14k just to shuffle some papers, that seems even better.

Most verbal real estate contracts aren't binding so I would go sign it ASAP.Typically you can sell contracts, but there may be some small print in the addendum that you submitted. Personally if it was me and I didn't know the person I was doing business with, I'd keep the two deals separate.

Buy the property in an LLC, then sell the LLC.You're welcome.

Can I form an LLC before the closing date in 28 days? Can you unpack this for me a little bit? I have never done this. If I am reading this right.1. I have the home under Contract.

2. I form an LLC to buy the home (offers have all been in my personal name, will this be a problem?)

3. I then just sell the LLC for say $10k to this other guy.

4. I walk with 10k and he owns the contract to buy the house from the foreclosing bank for $19k.

Couple of questions. Is the Bank ok with this? Do they need to know? How quickly can I form an LLC? Days?

Will the end-buyer have any issues with the title company? He is buying the home as a residence to his daughter. Not a business owner, more of a residential owner. Is there a tax reason that we cause him grief if he bought the home through and LLC and then just used it for his daughter to live in?

Am I getting ahead of myself here?

Buy the property in a company name (LLC) - this includes the contract.Sell the LLC.

You didn't assign the contract - you sold the company. The company was always on the contract.

I'd run it by your local RE title company / closing agent.

You may also save on transfer taxes as well.

I've asked my realtor to recommend a local attorney familiar with this type of thing. After doing some research online this appears to be the best way to purchase. I've seen where people use LLC or C-corps. This is nothing I know anything about so hopefully I can get the broad strokes off the innerwebs before my meeting. Jeff, you are talking about making the sale of the LLC before I even close right? I walk with some cash, he has the legal right to the contract I negotiated correct?

 

[Jeff Pasquino]

I have a question for those in the REI business.

I bid on the property above, it's a repo. The bank countered that at about $500 more (my realtor included for them to show clean title on it and some other small stuff). So now I have a counter offer of $19000 on the place. I confirmed to my realtor over the phone that I accept the counter.

Is the property as good as mine right now? Before I sign the counter? I mean can the bank for instance receive a bid this morning for $25k and pull the rug out from under me? Should I take off of work to go down and sign the counter? At what point is their a binding contract entitling me to the property?
My brother has a guy he works with who mentioned this exact property. He wants it for his daughter. The daughter and the guy's wife love the place. This co-worker told me brother he was going to submit a bid of $30-33k on the property. Assuming I get my deal closed, can I instantly turn around an sell this property to this other guy? What is the best way to do this? I am assuming I can't skip title. But could we do something where we all meet at the title office and do a double transfer? Is this legal?
For tax reasons, is this the best way to go about this? Mind you I want the property either way. On a flip I figure I could make $20-$35k on it. But if I can get $14k just to shuffle some papers, that seems even better.

Most verbal real estate contracts aren't binding so I would go sign it ASAP.Typically you can sell contracts, but there may be some small print in the addendum that you submitted. Personally if it was me and I didn't know the person I was doing business with, I'd keep the two deals separate.

Buy the property in an LLC, then sell the LLC.You're welcome.

Can I form an LLC before the closing date in 28 days? Can you unpack this for me a little bit? I have never done this. If I am reading this right.1. I have the home under Contract.

2. I form an LLC to buy the home (offers have all been in my personal name, will this be a problem?)

3. I then just sell the LLC for say $10k to this other guy.

4. I walk with 10k and he owns the contract to buy the house from the foreclosing bank for $19k.

Couple of questions. Is the Bank ok with this? Do they need to know? How quickly can I form an LLC? Days?

Will the end-buyer have any issues with the title company? He is buying the home as a residence to his daughter. Not a business owner, more of a residential owner. Is there a tax reason that we cause him grief if he bought the home through and LLC and then just used it for his daughter to live in?

Am I getting ahead of myself here?

Buy the property in a company name (LLC) - this includes the contract.Sell the LLC.

You didn't assign the contract - you sold the company. The company was always on the contract.

I'd run it by your local RE title company / closing agent.

You may also save on transfer taxes as well.

I've asked my realtor to recommend a local attorney familiar with this type of thing. After doing some research online this appears to be the best way to purchase. I've seen where people use LLC or C-corps. This is nothing I know anything about so hopefully I can get the broad strokes off the innerwebs before my meeting. Jeff, you are talking about making the sale of the LLC before I even close right? I walk with some cash, he has the legal right to the contract I negotiated correct?

Don't trust the realtor. Seriously. Unless they are tight with Real Estate specific lawyers.Other RE investors may also know attorneys (they should) and closing agents (some are one and the same) that can do this.

I'll expand on other topics like IDOTs and assignments another time - remind me.

For this case, the closing would be the sale of the corporation.

Think of it this way -

1. Company ABC LLC is established.

2. Company ABC LLC buys 123 Main street (or signs a contract to do it).

3. Company ABC LLC is sold to someone who wants to buy 123 Main Street.

The new owner of ABC LLC is now the owner of all the assets (and liabilities) of the LLC - which in this case would be 123 Main street.

The downside is that if you buy a long-standing LLC, you have to do due diligence on the LLC to make sure they didn't do anything stupid or have a lawsuit and/or debts besides 123 Main Street.

You're also responsible for keeping the LLC in good standing, which could mean tax filing issues and registration fees. This is why you need an attorney.

This is a loophole in the tax code in several areas of the country to be able to move real estate from one owner to another without paying transfer taxes. Corporations do this all the time, and states don't like it one bit.

I could go on, but I don't want to complicate matters.

As a personal policy, I don't like to write down creative strategies much any more as people (A) don't understand it, (B) think I'm doing something wrong or not "above board". I really don't need that headache. Those who learn from me directly know what I speak of.

Good luck.

 

[Random]

I have a question for those in the REI business.

I bid on the property above, it's a repo. The bank countered that at about $500 more (my realtor included for them to show clean title on it and some other small stuff). So now I have a counter offer of $19000 on the place. I confirmed to my realtor over the phone that I accept the counter.

Is the property as good as mine right now? Before I sign the counter? I mean can the bank for instance receive a bid this morning for $25k and pull the rug out from under me? Should I take off of work to go down and sign the counter? At what point is their a binding contract entitling me to the property?
My brother has a guy he works with who mentioned this exact property. He wants it for his daughter. The daughter and the guy's wife love the place. This co-worker told me brother he was going to submit a bid of $30-33k on the property. Assuming I get my deal closed, can I instantly turn around an sell this property to this other guy? What is the best way to do this? I am assuming I can't skip title. But could we do something where we all meet at the title office and do a double transfer? Is this legal?
For tax reasons, is this the best way to go about this? Mind you I want the property either way. On a flip I figure I could make $20-$35k on it. But if I can get $14k just to shuffle some papers, that seems even better.

Most verbal real estate contracts aren't binding so I would go sign it ASAP.Typically you can sell contracts, but there may be some small print in the addendum that you submitted. Personally if it was me and I didn't know the person I was doing business with, I'd keep the two deals separate.

Buy the property in an LLC, then sell the LLC.You're welcome.

Can I form an LLC before the closing date in 28 days? Can you unpack this for me a little bit? I have never done this. If I am reading this right.1. I have the home under Contract.

2. I form an LLC to buy the home (offers have all been in my personal name, will this be a problem?)

3. I then just sell the LLC for say $10k to this other guy.

4. I walk with 10k and he owns the contract to buy the house from the foreclosing bank for $19k.

Couple of questions. Is the Bank ok with this? Do they need to know? How quickly can I form an LLC? Days?

Will the end-buyer have any issues with the title company? He is buying the home as a residence to his daughter. Not a business owner, more of a residential owner. Is there a tax reason that we cause him grief if he bought the home through and LLC and then just used it for his daughter to live in?

Am I getting ahead of myself here?

Buy the property in a company name (LLC) - this includes the contract.Sell the LLC.

You didn't assign the contract - you sold the company. The company was always on the contract.

I'd run it by your local RE title company / closing agent.

You may also save on transfer taxes as well.

I've asked my realtor to recommend a local attorney familiar with this type of thing. After doing some research online this appears to be the best way to purchase. I've seen where people use LLC or C-corps. This is nothing I know anything about so hopefully I can get the broad strokes off the innerwebs before my meeting. Jeff, you are talking about making the sale of the LLC before I even close right? I walk with some cash, he has the legal right to the contract I negotiated correct?

Don't trust the realtor. Seriously. Unless they are tight with Real Estate specific lawyers.Other RE investors may also know attorneys (they should) and closing agents (some are one and the same) that can do this.

I'll expand on other topics like IDOTs and assignments another time - remind me.

For this case, the closing would be the sale of the corporation.

Think of it this way -

1. Company ABC LLC is established.

2. Company ABC LLC buys 123 Main street (or signs a contract to do it).

3. Company ABC LLC is sold to someone who wants to buy 123 Main Street.

The new owner of ABC LLC is now the owner of all the assets (and liabilities) of the LLC - which in this case would be 123 Main street.

The downside is that if you buy a long-standing LLC, you have to do due diligence on the LLC to make sure they didn't do anything stupid or have a lawsuit and/or debts besides 123 Main Street.

You're also responsible for keeping the LLC in good standing, which could mean tax filing issues and registration fees. This is why you need an attorney.

This is a loophole in the tax code in several areas of the country to be able to move real estate from one owner to another without paying transfer taxes. Corporations do this all the time, and states don't like it one bit.

I could go on, but I don't want to complicate matters.

As a personal policy, I don't like to write down creative strategies much any more as people (A) don't understand it, (B) think I'm doing something wrong or not "above board". I really don't need that headache. Those who learn from me directly know what I speak of.

Good luck.

What taxes are you avoiding by doing this? Is it just the 0.4% title transfer? Or are you avoiding the cap gains tax?

 

[Jeff Pasquino]

I have a question for those in the REI business.

I bid on the property above, it's a repo. The bank countered that at about $500 more (my realtor included for them to show clean title on it and some other small stuff). So now I have a counter offer of $19000 on the place. I confirmed to my realtor over the phone that I accept the counter.

Is the property as good as mine right now? Before I sign the counter? I mean can the bank for instance receive a bid this morning for $25k and pull the rug out from under me? Should I take off of work to go down and sign the counter? At what point is their a binding contract entitling me to the property?
My brother has a guy he works with who mentioned this exact property. He wants it for his daughter. The daughter and the guy's wife love the place. This co-worker told me brother he was going to submit a bid of $30-33k on the property. Assuming I get my deal closed, can I instantly turn around an sell this property to this other guy? What is the best way to do this? I am assuming I can't skip title. But could we do something where we all meet at the title office and do a double transfer? Is this legal?
For tax reasons, is this the best way to go about this? Mind you I want the property either way. On a flip I figure I could make $20-$35k on it. But if I can get $14k just to shuffle some papers, that seems even better.

Most verbal real estate contracts aren't binding so I would go sign it ASAP.Typically you can sell contracts, but there may be some small print in the addendum that you submitted. Personally if it was me and I didn't know the person I was doing business with, I'd keep the two deals separate.

Buy the property in an LLC, then sell the LLC.You're welcome.

Can I form an LLC before the closing date in 28 days? Can you unpack this for me a little bit? I have never done this. If I am reading this right.1. I have the home under Contract.

2. I form an LLC to buy the home (offers have all been in my personal name, will this be a problem?)

3. I then just sell the LLC for say $10k to this other guy.

4. I walk with 10k and he owns the contract to buy the house from the foreclosing bank for $19k.

Couple of questions. Is the Bank ok with this? Do they need to know? How quickly can I form an LLC? Days?

Will the end-buyer have any issues with the title company? He is buying the home as a residence to his daughter. Not a business owner, more of a residential owner. Is there a tax reason that we cause him grief if he bought the home through and LLC and then just used it for his daughter to live in?

Am I getting ahead of myself here?

Buy the property in a company name (LLC) - this includes the contract.Sell the LLC.

You didn't assign the contract - you sold the company. The company was always on the contract.

I'd run it by your local RE title company / closing agent.

You may also save on transfer taxes as well.

I've asked my realtor to recommend a local attorney familiar with this type of thing. After doing some research online this appears to be the best way to purchase. I've seen where people use LLC or C-corps. This is nothing I know anything about so hopefully I can get the broad strokes off the innerwebs before my meeting. Jeff, you are talking about making the sale of the LLC before I even close right? I walk with some cash, he has the legal right to the contract I negotiated correct?

Don't trust the realtor. Seriously. Unless they are tight with Real Estate specific lawyers.Other RE investors may also know attorneys (they should) and closing agents (some are one and the same) that can do this.

I'll expand on other topics like IDOTs and assignments another time - remind me.

For this case, the closing would be the sale of the corporation.

Think of it this way -

1. Company ABC LLC is established.

2. Company ABC LLC buys 123 Main street (or signs a contract to do it).

3. Company ABC LLC is sold to someone who wants to buy 123 Main Street.

The new owner of ABC LLC is now the owner of all the assets (and liabilities) of the LLC - which in this case would be 123 Main street.

The downside is that if you buy a long-standing LLC, you have to do due diligence on the LLC to make sure they didn't do anything stupid or have a lawsuit and/or debts besides 123 Main Street.

You're also responsible for keeping the LLC in good standing, which could mean tax filing issues and registration fees. This is why you need an attorney.

This is a loophole in the tax code in several areas of the country to be able to move real estate from one owner to another without paying transfer taxes. Corporations do this all the time, and states don't like it one bit.

I could go on, but I don't want to complicate matters.

As a personal policy, I don't like to write down creative strategies much any more as people (A) don't understand it, (B) think I'm doing something wrong or not "above board". I really don't need that headache. Those who learn from me directly know what I speak of.

Good luck.

What taxes are you avoiding by doing this? Is it just the 0.4% title transfer? Or are you avoiding the cap gains tax?

Some states have high transfer taxes.When you start talking about a few $100 to file an LLC and $1,000s in transfer taxes, it matters.

 

[Random]

I have a question for those in the REI business.

I bid on the property above, it's a repo. The bank countered that at about $500 more (my realtor included for them to show clean title on it and some other small stuff). So now I have a counter offer of $19000 on the place. I confirmed to my realtor over the phone that I accept the counter.

Is the property as good as mine right now? Before I sign the counter? I mean can the bank for instance receive a bid this morning for $25k and pull the rug out from under me? Should I take off of work to go down and sign the counter? At what point is their a binding contract entitling me to the property?
My brother has a guy he works with who mentioned this exact property. He wants it for his daughter. The daughter and the guy's wife love the place. This co-worker told me brother he was going to submit a bid of $30-33k on the property. Assuming I get my deal closed, can I instantly turn around an sell this property to this other guy? What is the best way to do this? I am assuming I can't skip title. But could we do something where we all meet at the title office and do a double transfer? Is this legal?
For tax reasons, is this the best way to go about this? Mind you I want the property either way. On a flip I figure I could make $20-$35k on it. But if I can get $14k just to shuffle some papers, that seems even better.

Most verbal real estate contracts aren't binding so I would go sign it ASAP.Typically you can sell contracts, but there may be some small print in the addendum that you submitted. Personally if it was me and I didn't know the person I was doing business with, I'd keep the two deals separate.

Buy the property in an LLC, then sell the LLC.You're welcome.

Can I form an LLC before the closing date in 28 days? Can you unpack this for me a little bit? I have never done this. If I am reading this right.1. I have the home under Contract.

2. I form an LLC to buy the home (offers have all been in my personal name, will this be a problem?)

3. I then just sell the LLC for say $10k to this other guy.

4. I walk with 10k and he owns the contract to buy the house from the foreclosing bank for $19k.

Couple of questions. Is the Bank ok with this? Do they need to know? How quickly can I form an LLC? Days?

Will the end-buyer have any issues with the title company? He is buying the home as a residence to his daughter. Not a business owner, more of a residential owner. Is there a tax reason that we cause him grief if he bought the home through and LLC and then just used it for his daughter to live in?

Am I getting ahead of myself here?

Buy the property in a company name (LLC) - this includes the contract.Sell the LLC.

You didn't assign the contract - you sold the company. The company was always on the contract.

I'd run it by your local RE title company / closing agent.

You may also save on transfer taxes as well.

I've asked my realtor to recommend a local attorney familiar with this type of thing. After doing some research online this appears to be the best way to purchase. I've seen where people use LLC or C-corps. This is nothing I know anything about so hopefully I can get the broad strokes off the innerwebs before my meeting. Jeff, you are talking about making the sale of the LLC before I even close right? I walk with some cash, he has the legal right to the contract I negotiated correct?

Don't trust the realtor. Seriously. Unless they are tight with Real Estate specific lawyers.Other RE investors may also know attorneys (they should) and closing agents (some are one and the same) that can do this.

I'll expand on other topics like IDOTs and assignments another time - remind me.

For this case, the closing would be the sale of the corporation.

Think of it this way -

1. Company ABC LLC is established.

2. Company ABC LLC buys 123 Main street (or signs a contract to do it).

3. Company ABC LLC is sold to someone who wants to buy 123 Main Street.

The new owner of ABC LLC is now the owner of all the assets (and liabilities) of the LLC - which in this case would be 123 Main street.

The downside is that if you buy a long-standing LLC, you have to do due diligence on the LLC to make sure they didn't do anything stupid or have a lawsuit and/or debts besides 123 Main Street.

You're also responsible for keeping the LLC in good standing, which could mean tax filing issues and registration fees. This is why you need an attorney.

This is a loophole in the tax code in several areas of the country to be able to move real estate from one owner to another without paying transfer taxes. Corporations do this all the time, and states don't like it one bit.

I could go on, but I don't want to complicate matters.

As a personal policy, I don't like to write down creative strategies much any more as people (A) don't understand it, (B) think I'm doing something wrong or not "above board". I really don't need that headache. Those who learn from me directly know what I speak of.

Good luck.

What taxes are you avoiding by doing this? Is it just the 0.4% title transfer? Or are you avoiding the cap gains tax?

Some states have high transfer taxes.When you start talking about a few $100 to file an LLC and $1,000s in transfer taxes, it matters.

Just clarifying. He's only talking about transferring a 30K property. Not sure I'd recommend going this route for him.

 

[Mike Anderson]

how many of you invest into cash earning property? now is a good time to buy.

Where? Show me what you think is a good deal - PM / email if needed.

Depends what you are looking for, cap rates across the board are going up. I'm in California but see listings all over the US. Commercial only.

I am interesting in learning about Self-storage facilities. Don't know one thing about them except that using basic algebra tells me they can make some good money. Can somebody give me a quick and dirty example of a Cap Rate? I hear these used in Mobile home park circles a bit.

There's a pretty good discussion on CAP rate on page 16 of this thread. There's more on pages 22,26 and 31.

I'll check that out. Nothing like looking right under my nose.

This thread needs a glossary.

Does it ever! There are so many things that I KNOW are in here, and I shift some 30 pages around where I think it should be, only to just give up sometimes. Finding things right now is sort of a :trainwreck:

 

[Mike Anderson]

What taxes are you avoiding by doing this? Is it just the 0.4% title transfer? Or are you avoiding the cap gains tax?

Anyone with a decent CPA won't pay Capital Gains in 2008, 2009, or 2010 anyway. Congress gave us a huge present with the 05 TIPRA.

 

[Sabertooth]

Mike, I see you are in here.

Couple of questions

Single or double hung windows?

I am replacing all siding. Would I save a good chunk of change by going with catalog sized windows instead of custom?

When you flip a home, where do you put the "little extras?"

Do you paint the walls with color or leave everything white like Steve Cook recommends?

Can I really pex my whole two story flip myself? Will I have code or contractor issues with doing this? Existing Plumbing is mess.

What work do you recommend staying away from and letting contractors do?

What pitfalls might I want to look out for?

Does Tyvek on the outside provide moisture barrier? Can it be put over existing siding?

 

[Random]

What taxes are you avoiding by doing this? Is it just the 0.4% title transfer? Or are you avoiding the cap gains tax?

Anyone with a decent CPA won't pay Capital Gains in 2008, 2009, or 2010 anyway. Congress gave us a huge present with the 05 TIPRA.

Mike - Please unpack this for me. I'm an accountant and do my own taxes (not really a tax guy) and never heard of this. I paid cap gains tax on the flip I sold last year. Did I miss something? Pretty sure I couldn't 1031 it because my purchase was less than what I sold. But I have no idea what this TIPRA is.TIA

eta : Looks like its for long term capital gains. WIKI link

 

[Random]

Mike, I see you are in here.

Couple of questions

Single or double hung windows?

I've never replaced windows. Personally, I'd go with the cheapest option you can find.

I am replacing all siding. Would I save a good chunk of change by going with catalog sized windows instead of custom?

When you flip a home, where do you put the "little extras?"

In your pocket. Don't do anything that wont significantly increase your selling price. Very little, if anything, should be spent outside of kitchens and bathrooms. Only fix whats broken. Somewhere in this thread someone states "you're money is made when you buy", so you're only trying to bring the house up to par so you can sell it at a fair market price.

Do you paint the walls with color or leave everything white like Steve Cook recommends?

I've done two flips. The first one we used a beige color, the second we used a dover white. Both turned out fine. I wouldn't get too crazy with color.

Can I really pex my whole two story flip myself? Will I have code or contractor issues with doing this? Existing Plumbing is mess.

What work do you recommend staying away from and letting contractors do?

We're toying with this now. Would love to be able to do more flips so we're trying to decide whats worth contracting. So far its been next to nothing.

What pitfalls might I want to look out for?

Does Tyvek on the outside provide moisture barrier? Can it be put over existing siding?

My :( in blue.

 

[Mike Anderson]

What taxes are you avoiding by doing this? Is it just the 0.4% title transfer? Or are you avoiding the cap gains tax?

Anyone with a decent CPA won't pay Capital Gains in 2008, 2009, or 2010 anyway. Congress gave us a huge present with the 05 TIPRA.

Mike - Please unpack this for me. I'm an accountant and do my own taxes (not really a tax guy) and never heard of this. I paid cap gains tax on the flip I sold last year. Did I miss something? Pretty sure I couldn't 1031 it because my purchase was less than what I sold. But I have no idea what this TIPRA is.TIA

eta : Looks like its for long term capital gains. WIKI link

Sure, the TIPRA of 2005 passed by Congress and signed by Bush basically states that tax payers in the lower brackets (10% and 15%) will pay NO/ZERO/NADA/ZIP/ZILCH Capital Gains on Properties sold in 2008, 2009, and 2010.It does apply to investors, but you need to be in the 10% or 15% tax brackets. The intent of the law was for Mutual Fund shares that are worth significantly more than they were when purchased. It was for the Gray hairs retirement planning as they most likely fall in that lower tax bracket.

However ......

Now, if you live in the Socialist Republic of California, you most likely can't take advantage of this. Why? Because you are going to make so freaking much when you sell that home you bought a number of years ago, that there is no way you will be in a Lower tax bracket.

But if you operate in the Midwest, where things are reasonable, you aren't going to make a mint from a sale, say $10-50K or so. Not enough to push your income too high. With a good CPA, you can get into the lower tax bracket. I can't remember the last year I paid taxes between my Expenses and Depreciation of 40 some buildings over 27.5 years.

Actually, this year a couple filing jointly can make up to $61,300 NET and still fall in at the 15% rate for the Zero Capital Gains. Easily done in the Midwest even with a Flip.

So given that Capital Gains is at 15% of a property held over a year, and 25% for under a year, ZERO sounds just about perfect.

Everyone in realistic Midwest Markets should be using this to their advantage in planning over the next few years. Congress put this into law to help with Stocks, Mutual funds, and retirement vehicles. It just that Midwest Real Estate Investors fall right into the sweet spot. Selling in a Hot market most likely takes you out of the 15% tax bracket based on the sale of the property alone.

Only fear I can see is that one of the Socialists gets elected President and removes the advantage for 2010, but we have 2008 for sure, and surely will have 2009.

There is a ton of other stuff in the TIPRA of 2005. As an example in 2010 there is a one year waiver of Income limits on Roth IRA conversions.

 

[Sabertooth]

Mike,

If my wife pulls in 50k per year, and I make say 50k in profits from flips, do we still qualify if we file jointly? Is it different if we file seperately?

 

[Random]

Mike, If my wife pulls in 50k per year, and I make say 50k in profits from flips, do we still qualify if we file jointly? Is it different if we file seperately?

This is for LONG TERM (> 1 year) capital gains.

 

[Mike Anderson]

Mike, If my wife pulls in 50k per year, and I make say 50k in profits from flips, do we still qualify if we file jointly? Is it different if we file seperately?

That is a GREAT question for your CPA. I am not one, and wouldn't want to give any real planning advice. I know that I am going to have a long talk with my CPA this year to make sure I have planned correctly. I have a few things I want to sell and I have been waiting for 2008 to get here.In my case, I can destroy most "profit" with deductions. As an example, what a great year to buy a new Company truck to use for the properties. Don't you need a new truck for your rehabs? If my two choices are give $14K to the Government or give myself a new truck while giving the government nothing...... Say you bought a Flip home with a $100K basis. Even 6 months of the depreciation and you can claim $1,800.00 off your gross income. You can find the deductions.IF you are going to sell ANYTHING in the next three years that has gained value, everyone needs to do is sit down with your CPA and plan out a battle plan for the next few years. Not only Real Estate. I know that alot of what I do this year will depend on what the CPA says.

 

[Tiger Fan]

Currently paying 5.75% (30 years fixed) on about 148k. House is worth about $210k. I've just obtained a plot of land that I will be building on in the next few years, so the max I would be in my current house is probably 2 years.

Since I'll definitely be selling this house, I'm thinking it's wise to refinance to an IO to reduce my monthly outlay as low as possible. Credit scores are (747, 740 & 775, fwiw). Obviously, I'll have to take closing costs into effect, but are there any flaws in my logic here?

 

[Random]

Currently paying 5.75% (30 years fixed) on about 148k. House is worth about $210k. I've just obtained a plot of land that I will be building on in the next few years, so the max I would be in my current house is probably 2 years. Since I'll definitely be selling this house, I'm thinking it's wise to refinance to an IO to reduce my monthly outlay as low as possible. Credit scores are (747, 740 & 775, fwiw). Obviously, I'll have to take closing costs into effect, but are there any flaws in my logic here?

Why do you want to reduce your monthly outlay? On the land or house?

 

[Tiger Fan]

Currently paying 5.75% (30 years fixed) on about 148k. House is worth about $210k. I've just obtained a plot of land that I will be building on in the next few years, so the max I would be in my current house is probably 2 years. Since I'll definitely be selling this house, I'm thinking it's wise to refinance to an IO to reduce my monthly outlay as low as possible. Credit scores are (747, 740 & 775, fwiw). Obviously, I'll have to take closing costs into effect, but are there any flaws in my logic here?

Why do you want to reduce your monthly outlay? On the land or house?

on my current house (which I will be selling in the next 1-2 years).....to save cash. Land is 100% paid for

 

[Random]

Currently paying 5.75% (30 years fixed) on about 148k. House is worth about $210k. I've just obtained a plot of land that I will be building on in the next few years, so the max I would be in my current house is probably 2 years. Since I'll definitely be selling this house, I'm thinking it's wise to refinance to an IO to reduce my monthly outlay as low as possible. Credit scores are (747, 740 & 775, fwiw). Obviously, I'll have to take closing costs into effect, but are there any flaws in my logic here?

Why do you want to reduce your monthly outlay? On the land or house?

on my current house (which I will be selling in the next 1-2 years).....to save cash. Land is 100% paid for

Are you planning on building before you sell your current house? I'm not sure what you'll be accomplishing by refinancing a house you're going to be selling in a few years.Do you know the I/O rate you'd get? Cant imagine its going to be better than 5.75. Then add in closing costs, and I'm pretty sure you'll come out ahead by keeping your current mortgage.

 

[Tiger Fan]

Currently paying 5.75% (30 years fixed) on about 148k. House is worth about $210k. I've just obtained a plot of land that I will be building on in the next few years, so the max I would be in my current house is probably 2 years. Since I'll definitely be selling this house, I'm thinking it's wise to refinance to an IO to reduce my monthly outlay as low as possible. Credit scores are (747, 740 & 775, fwiw). Obviously, I'll have to take closing costs into effect, but are there any flaws in my logic here?

Why do you want to reduce your monthly outlay? On the land or house?

on my current house (which I will be selling in the next 1-2 years).....to save cash. Land is 100% paid for

Are you planning on building before you sell your current house? I'm not sure what you'll be accomplishing by refinancing a house you're going to be selling in a few years.Do you know the I/O rate you'd get? Cant imagine its going to be better than 5.75. Then add in closing costs, and I'm pretty sure you'll come out ahead by keeping your current mortgage.

Yes, we'll be building before we sell our current house. E-loan suggests I can get 4.75% 3 Year ARM (30 year loan, fixed for 3 years) Interest-Only payments.

 

[Tiger Fan]

Currently paying 5.75% (30 years fixed) on about 148k. House is worth about $210k. I've just obtained a plot of land that I will be building on in the next few years, so the max I would be in my current house is probably 2 years. Since I'll definitely be selling this house, I'm thinking it's wise to refinance to an IO to reduce my monthly outlay as low as possible. Credit scores are (747, 740 & 775, fwiw). Obviously, I'll have to take closing costs into effect, but are there any flaws in my logic here?

Why do you want to reduce your monthly outlay? On the land or house?

on my current house (which I will be selling in the next 1-2 years).....to save cash. Land is 100% paid for

Are you planning on building before you sell your current house? I'm not sure what you'll be accomplishing by refinancing a house you're going to be selling in a few years.Do you know the I/O rate you'd get? Cant imagine its going to be better than 5.75. Then add in closing costs, and I'm pretty sure you'll come out ahead by keeping your current mortgage.

Yes, we'll be building before we sell our current house. E-loan suggests I can get 4.75% 3 Year ARM (30 year loan, fixed for 3 years) Interest-Only payments.

 

[Random]

Currently paying 5.75% (30 years fixed) on about 148k. House is worth about $210k. I've just obtained a plot of land that I will be building on in the next few years, so the max I would be in my current house is probably 2 years. Since I'll definitely be selling this house, I'm thinking it's wise to refinance to an IO to reduce my monthly outlay as low as possible. Credit scores are (747, 740 & 775, fwiw). Obviously, I'll have to take closing costs into effect, but are there any flaws in my logic here?

Why do you want to reduce your monthly outlay? On the land or house?

on my current house (which I will be selling in the next 1-2 years).....to save cash. Land is 100% paid for

Are you planning on building before you sell your current house? I'm not sure what you'll be accomplishing by refinancing a house you're going to be selling in a few years.Do you know the I/O rate you'd get? Cant imagine its going to be better than 5.75. Then add in closing costs, and I'm pretty sure you'll come out ahead by keeping your current mortgage.

Yes, we'll be building before we sell our current house. E-loan suggests I can get 4.75% 3 Year ARM (30 year loan, fixed for 3 years) Interest-Only payments.

Sorry bro, not following you on this one. Not saying its wrong or a bad idea, just not following.

 

[Tiger Fan]

Currently paying 5.75% (30 years fixed) on about 148k. House is worth about $210k. I've just obtained a plot of land that I will be building on in the next few years, so the max I would be in my current house is probably 2 years. Since I'll definitely be selling this house, I'm thinking it's wise to refinance to an IO to reduce my monthly outlay as low as possible. Credit scores are (747, 740 & 775, fwiw). Obviously, I'll have to take closing costs into effect, but are there any flaws in my logic here?

Why do you want to reduce your monthly outlay? On the land or house?

on my current house (which I will be selling in the next 1-2 years).....to save cash. Land is 100% paid for

Are you planning on building before you sell your current house? I'm not sure what you'll be accomplishing by refinancing a house you're going to be selling in a few years.Do you know the I/O rate you'd get? Cant imagine its going to be better than 5.75. Then add in closing costs, and I'm pretty sure you'll come out ahead by keeping your current mortgage.

Yes, we'll be building before we sell our current house. E-loan suggests I can get 4.75% 3 Year ARM (30 year loan, fixed for 3 years) Interest-Only payments.

Sorry bro, not following you on this one. Not saying its wrong or a bad idea, just not following.

If I shift from a 30 year fixed to an I/O (at a lower rate), the monthly payments will lower, no? As long as the total savings of the lower payments are higher than the closing costs, it would be wise to refinance....this is all knowing that I'll be selling the property withing 3 years, so I have no problem adopting an I/O ARM

 

[Mike Anderson]

Currently paying 5.75% (30 years fixed) on about 148k. House is worth about $210k. I've just obtained a plot of land that I will be building on in the next few years, so the max I would be in my current house is probably 2 years.

Since I'll definitely be selling this house, I'm thinking it's wise to refinance to an IO to reduce my monthly outlay as low as possible. Credit scores are (747, 740 & 775, fwiw). Obviously, I'll have to take closing costs into effect, but are there any flaws in my logic here?

Why do you want to reduce your monthly outlay? On the land or house?

on my current house (which I will be selling in the next 1-2 years).....to save cash. Land is 100% paid for

Are you planning on building before you sell your current house? I'm not sure what you'll be accomplishing by refinancing a house you're going to be selling in a few years.Do you know the I/O rate you'd get? Cant imagine its going to be better than 5.75. Then add in closing costs, and I'm pretty sure you'll come out ahead by keeping your current mortgage.

Yes, we'll be building before we sell our current house. E-loan suggests I can get 4.75% 3 Year ARM (30 year loan, fixed for 3 years) Interest-Only payments.

Sorry bro, not following you on this one. Not saying its wrong or a bad idea, just not following.

If I shift from a 30 year fixed to an I/O (at a lower rate), the monthly payments will lower, no? As long as the total savings of the lower payments are higher than the closing costs, it would be wise to refinance....this is all knowing that I'll be selling the property withing 3 years, so I have no problem adopting an I/O ARM

I completely understand, I use Interest only to purchase properties I KNOW I will be refi-ing later to cash out, Why outlay the monthly funds when I know I will refi.Anyway, here is my question, and you need to do the math, or give me enough details to do the math for you.

Option 1) Stay where you are at for the next two years. This means nothing changes.

Option 2) Refi to interest only for a lower payment while incurring closing costs.

Option 2 USED TO BE A BONEHEAD MOVE for just 2 years or so. Reason being that the closing costs would be FAR greater than the savings in a short time period.

As an example just pulling numbers out of the air: $4K to close the deal, savings of $100 a month, you lose about $1600 to make this deal happen.

However, Finances are very different nowadays.

You can go Interest only, (Which is a VERY scary way to HOLD property over time, but is a useful tool when used for short moves. I would buy a Flip home with an Interest only loan). Closing costs can be next to nothing.

SO, if the Math says to do it, I would.

Monthly savings x 24 (36) > Closing costs + Out of pocket expenses

If yes, I would make the move.

Do take into account that the arm on that loan is at 3 years, and it could be VERY ugly when it adjusts. Even 6 months at the new rate could destroy all of the savings you create now. I would make sure I knew my time line, and would absolutely factor in overages. It will take twice as long to build your dream home as you think it will.

 

[Mike Anderson]

For the above comment, I should add that unless you've owned the property a long time, I doubt that the % point is going to create anywhere near as big of a savings as you are hoping for.

Lay out the Math, I'd love to be wrong, but my Gut tells me that unless you have extremely low closing costs including all the other out of pockets, it's not going to prove worthwhile.

Chasing a % point on a loan that you will hold for 20 more years would be very worth it.

 

[Random]

Here's my disconnect with doing what tiger fan is suggesting. He is talking about moving from a 30 yr fixed at a very good rate to a 3/1 ARM I/O to "save" a minimal amount over at most 3 years.

1) I personally know people that have bought land with the intent of building on it "in a few years" only to still have it sitting there 10+ years later. What if something happens financially over the next year or so and you dont get your plans off the ground? Your ARM adjusts and you're one of the stories we're reading about in the paper. Take this into consideration before you move forward.

2) Why not just open an equity line on your house to cover the needed expenses between the time you start building and the time you sell your home? Sounds like you have 50K-60K in equity. You dont need to refi to access that money. You can open an equity line, at no or very little cost, and not even use it. It costs nothing to do this. And you dont pay interest on it until you actually use it. A HELOC is also interest only.

3) The difference between what your paying now and what you'd be paying on an interest only is going to be minimal. Whatever difference there my be is most likely currently going to principal on your current loan. You're not really "saving" the difference in payments.

I have not run the numbers either, but would urge you to be very cautious refinancing your primary residence to a 3/1 ARM. I really don't see how the benefits could be greater than the potential costs.

 

[Sabertooth]

Here's my disconnect with doing what tiger fan is suggesting. He is talking about moving from a 30 yr fixed at a very good rate to a 3/1 ARM I/O to "save" a minimal amount over at most 3 years. 1) I personally know people that have bought land with the intent of building on it "in a few years" only to still have it sitting there 10+ years later. What if something happens financially over the next year or so and you dont get your plans off the ground? Your ARM adjusts and you're one of the stories we're reading about in the paper. Take this into consideration before you move forward.2) Why not just open an equity line on your house to cover the needed expenses between the time you start building and the time you sell your home? Sounds like you have 50K-60K in equity. You dont need to refi to access that money. You can open an equity line, at no or very little cost, and not even use it. It costs nothing to do this. And you dont pay interest on it until you actually use it. A HELOC is also interest only. 3) The difference between what your paying now and what you'd be paying on an interest only is going to be minimal. Whatever difference there my be is most likely currently going to principal on your current loan. You're not really "saving" the difference in payments. I have not run the numbers either, but would urge you to be very cautious refinancing your primary residence to a 3/1 ARM. I really don't see how the benefits could be greater than the potential costs.

I agree. You have to look longer term here. Plus there is the uncertainty. What if he got laid off? Lot's of what ifs. I think you keep the mortgage as-is and put in some OT or get a part time job at Sunglasses hut to make up the extra couple hundy a month.

 

[Tiger Fan]

Thanks for the feedback everyone. A few notes:

-I'm obligated to start building in the next 3 years (part of the post Katrina stuff with the state) on the land I have.

-I used a 3 year IO as an example, and I understand that if for some reason I to have to realize the increased payments that they will rise greatly.

-I'm not doing this to cover the expenses of building the house, I'm doing it from a purely cash outlay standpoint (i.e. why spend more on a mortgage payment when I know I'm going to sell the house)

-I will be running the math, and obviously if the projected savings is only a few hundred bucks - it's not worth it.

 

[stevegamer]

Looking for some feedback on handling a dispute over falling tree limbs onto my aunt's property in Philadelphia.

Property with tree is an absentee owner, and owes back taxes. The "tenant" - not sure if there's any legal relation - tried to remove evidence of falling tree limbs onto the fence, clothesline & yard. Trees did a few hundred bucks in damage, tops.

I've got pictures that are dated with that day's newspaper, and she's reported it to the police. She wants to get paid for damage but does not want to go to small claims court, as it's time consuming and "they will just leave the city and not pay me anything".

I've told her to basically eat the loss if she doesn't want to go to court. Anyone know of any other recourse?

 

[Jeff Pasquino]

Here's my disconnect with doing what tiger fan is suggesting. He is talking about moving from a 30 yr fixed at a very good rate to a 3/1 ARM I/O to "save" a minimal amount over at most 3 years. 1) I personally know people that have bought land with the intent of building on it "in a few years" only to still have it sitting there 10+ years later. What if something happens financially over the next year or so and you dont get your plans off the ground? Your ARM adjusts and you're one of the stories we're reading about in the paper. Take this into consideration before you move forward.2) Why not just open an equity line on your house to cover the needed expenses between the time you start building and the time you sell your home? Sounds like you have 50K-60K in equity. You dont need to refi to access that money. You can open an equity line, at no or very little cost, and not even use it. It costs nothing to do this. And you dont pay interest on it until you actually use it. A HELOC is also interest only. 3) The difference between what your paying now and what you'd be paying on an interest only is going to be minimal. Whatever difference there my be is most likely currently going to principal on your current loan. You're not really "saving" the difference in payments. I have not run the numbers either, but would urge you to be very cautious refinancing your primary residence to a 3/1 ARM. I really don't see how the benefits could be greater than the potential costs.

I can wag the numbers, because that's what I can do.5.75% at 30 years is a shade under $600 per 100K. 5.75% should be about 566 per 100K, so 148K is about 850 a month.At 4.75%, that saves about $100 a month. ($750 a month).I would rather take out the home equity line and have the house pay your mortgage.Say you set up an 80% CLTV equity loan (CLTV is cumulative loan to value). At $210K worth that's $168K. That means you can borrow from your house $20K.Let's also say you get a bad rate - say 9% - for a 2nd. Probably not, but let's say it anyway.The $20K at 30 years would be $160 a month. Odds are you do better, but you get the idea.Well, look now. You suddenly have $20K in your bank and you can use that to pay the $160 a month and also pay your mortgage of $850 for 2 years. ($20,400 is 24 payments if I did that right). Basically you've dropped your cash flow from $850 a month for 2 years down to $160 (the $20K).Now you have to figure it out if that's worth it to you - saving $690 a month for 2 years in trade for owing $20K more on your house 2 years from now - but that's up to you.Just the power of doing some math. Whether this suits your need or not I cannot say, but this can be done. Odds are that this is a BAD idea because people often don't save / invest their cash flow.Note - HELOCs are cheaper to set up as well.

 

[Tiger Fan]

Here's my disconnect with doing what tiger fan is suggesting. He is talking about moving from a 30 yr fixed at a very good rate to a 3/1 ARM I/O to "save" a minimal amount over at most 3 years. 1) I personally know people that have bought land with the intent of building on it "in a few years" only to still have it sitting there 10+ years later. What if something happens financially over the next year or so and you dont get your plans off the ground? Your ARM adjusts and you're one of the stories we're reading about in the paper. Take this into consideration before you move forward.2) Why not just open an equity line on your house to cover the needed expenses between the time you start building and the time you sell your home? Sounds like you have 50K-60K in equity. You dont need to refi to access that money. You can open an equity line, at no or very little cost, and not even use it. It costs nothing to do this. And you dont pay interest on it until you actually use it. A HELOC is also interest only. 3) The difference between what your paying now and what you'd be paying on an interest only is going to be minimal. Whatever difference there my be is most likely currently going to principal on your current loan. You're not really "saving" the difference in payments. I have not run the numbers either, but would urge you to be very cautious refinancing your primary residence to a 3/1 ARM. I really don't see how the benefits could be greater than the potential costs.

I can wag the numbers, because that's what I can do.5.75% at 30 years is a shade under $600 per 100K. 5.75% should be about 566 per 100K, so 148K is about 850 a month.At 4.75%, that saves about $100 a month. ($750 a month).I would rather take out the home equity line and have the house pay your mortgage.Say you set up an 80% CLTV equity loan (CLTV is cumulative loan to value). At $210K worth that's $168K. That means you can borrow from your house $20K.Let's also say you get a bad rate - say 9% - for a 2nd. Probably not, but let's say it anyway.The $20K at 30 years would be $160 a month. Odds are you do better, but you get the idea.Well, look now. You suddenly have $20K in your bank and you can use that to pay the $160 a month and also pay your mortgage of $850 for 2 years. ($20,400 is 24 payments if I did that right). Basically you've dropped your cash flow from $850 a month for 2 years down to $160 (the $20K).Now you have to figure it out if that's worth it to you - saving $690 a month for 2 years in trade for owing $20K more on your house 2 years from now - but that's up to you.Just the power of doing some math. Whether this suits your need or not I cannot say, but this can be done. Odds are that this is a BAD idea because people often don't save / invest their cash flow.Note - HELOCs are cheaper to set up as well.

Very thought provoking, if what you say works, I have no problem saving/investing the cash flow during the two years b/c at the end of the day it seems like I’m risking ~$4k ($20k in loan - ~$16k in cash flow savings) if I can’t sell my house in 2 years….and that’s a risk worth taking. A few comments:I’m confused where the $160/month came from. Here’s how I break everything down…please let me know where I am mistaken.1. Take out a HELOC (lets say 9% using your example) for 80% of the value of the house2. I have an extra $19,360 in cash that I will save/invest3. Doing the math, this looks like I’ll be paying $1260/month (9% on $168,000)4. Take the $1260 and make my $850/month payments to my 1st mortgage5. This leaves me with $410 payments, which is why I’m confused about the $160/month that you mentioned. Why would I only pay interest on the $19,360?

House is worth		$210,000.0Mortage Balance	   $148,640.0Current Equity		$  61,360.80% CLTV HELOC		$168,000.0IO Loan payment	   $	1,260Payment to 1st mortga $	  850Payment to HELOC	  $	  410

 

[Berger]

Very thought provoking, if what you say works, I have no problem saving/investing the cash flow during the two years b/c at the end of the day it seems like I’m risking ~$4k ($20k in loan - ~$16k in cash flow savings) if I can’t sell my house in 2 years….and that’s a risk worth taking. A few comments:I’m confused where the $160/month came from. Here’s how I break everything down…please let me know where I am mistaken.1. Take out a HELOC (lets say 9% using your example) for 80% of the value of the house2. I have an extra $19,360 in cash that I will save/invest3. Doing the math, this looks like I’ll be paying $1260/month (9% on $168,000)4. Take the $1260 and make my $850/month payments to my 1st mortgage5. This leaves me with $410 payments, which is why I’m confused about the $160/month that you mentioned. Why would I only pay interest on the $19,360?

House is worth		$210,000.0Mortage Balance	   $148,640.0Current Equity		$  61,360.80% CLTV HELOC		$168,000.0IO Loan payment	   $	1,260Payment to 1st mortga $	  850Payment to HELOC	  $	  410

I'm still not seeing the big picture here (btw Random is on vacation and should be back later today so I'm posting for him ).My question is WHY do you want to do this??? You say its to save cashflow. But you don't appear to need the cash - or even have a good place to put it, so you're basically robbing Peter to pay Paul. If you're even considering doing the above you do realize that you'd have to put that money somewhere where it will earn >9% (or whatever your rate on your HELOC) to come out ahead. Not going to happen without significant risk on money you will need short term. Very bad mix.Please point me to the post where you say what you are planning on doing with the money because I've obviously missed it.

 

[Jeff Pasquino]

Here's my disconnect with doing what tiger fan is suggesting. He is talking about moving from a 30 yr fixed at a very good rate to a 3/1 ARM I/O to "save" a minimal amount over at most 3 years. 1) I personally know people that have bought land with the intent of building on it "in a few years" only to still have it sitting there 10+ years later. What if something happens financially over the next year or so and you dont get your plans off the ground? Your ARM adjusts and you're one of the stories we're reading about in the paper. Take this into consideration before you move forward.2) Why not just open an equity line on your house to cover the needed expenses between the time you start building and the time you sell your home? Sounds like you have 50K-60K in equity. You dont need to refi to access that money. You can open an equity line, at no or very little cost, and not even use it. It costs nothing to do this. And you dont pay interest on it until you actually use it. A HELOC is also interest only. 3) The difference between what your paying now and what you'd be paying on an interest only is going to be minimal. Whatever difference there my be is most likely currently going to principal on your current loan. You're not really "saving" the difference in payments. I have not run the numbers either, but would urge you to be very cautious refinancing your primary residence to a 3/1 ARM. I really don't see how the benefits could be greater than the potential costs.

I can wag the numbers, because that's what I can do.5.75% at 30 years is a shade under $600 per 100K. 5.75% should be about 566 per 100K, so 148K is about 850 a month.At 4.75%, that saves about $100 a month. ($750 a month).I would rather take out the home equity line and have the house pay your mortgage.Say you set up an 80% CLTV equity loan (CLTV is cumulative loan to value). At $210K worth that's $168K. That means you can borrow from your house $20K.Let's also say you get a bad rate - say 9% - for a 2nd. Probably not, but let's say it anyway.The $20K at 30 years would be $160 a month. Odds are you do better, but you get the idea.Well, look now. You suddenly have $20K in your bank and you can use that to pay the $160 a month and also pay your mortgage of $850 for 2 years. ($20,400 is 24 payments if I did that right). Basically you've dropped your cash flow from $850 a month for 2 years down to $160 (the $20K).Now you have to figure it out if that's worth it to you - saving $690 a month for 2 years in trade for owing $20K more on your house 2 years from now - but that's up to you.Just the power of doing some math. Whether this suits your need or not I cannot say, but this can be done. Odds are that this is a BAD idea because people often don't save / invest their cash flow.Note - HELOCs are cheaper to set up as well.

Very thought provoking, if what you say works, I have no problem saving/investing the cash flow during the two years b/c at the end of the day it seems like I'm risking ~$4k ($20k in loan - ~$16k in cash flow savings) if I can't sell my house in 2 years….and that's a risk worth taking. A few comments:I'm confused where the $160/month came from. Here's how I break everything down…please let me know where I am mistaken.1. Take out a HELOC (lets say 9% using your example) for 80% of the value of the house2. I have an extra $19,360 in cash that I will save/invest3. Doing the math, this looks like I'll be paying $1260/month (9% on $168,000)4. Take the $1260 and make my $850/month payments to my 1st mortgage5. This leaves me with $410 payments, which is why I'm confused about the $160/month that you mentioned. Why would I only pay interest on the $19,360?

House is worth		$210,000.0 Mortage Balance	   $148,640.0 Current Equity		{:content:}nbsp; 61,360.  80% CLTV HELOC		$168,000.0 IO Loan payment	   {:content:}nbsp;   1,260 Payment to 1st mortga {:content:}nbsp;	 850 Payment to HELOC	  {:content:}nbsp;	 410

Sorry, I do math quickly so I tend to gloss over some things. Sorry.The HELOC wouldn't go in place of the first - it would be in addition to the first mortgage. Just the $20K between $168 and 148.The $20K payment per month would be $140-160, depending on rate. The first would remain in place and cost you about $850 a month, and now you'd owe an additional $150 a month for the HELOC.$1K a month for 20 months would exhaust the 20K you just borrowed, but you'd be living payment free for those 20 months.You have to be aware of the concerns after 20 months - $1K a month and a bigger debt - but this would satisfy your cash flow question.

 

[Tiger Fan]

Very thought provoking, if what you say works, I have no problem saving/investing the cash flow during the two years b/c at the end of the day it seems like I’m risking ~$4k ($20k in loan - ~$16k in cash flow savings) if I can’t sell my house in 2 years….and that’s a risk worth taking.

A few comments:

I’m confused where the $160/month came from. Here’s how I break everything down…please let me know where I am mistaken.

1. Take out a HELOC (lets say 9% using your example) for 80% of the value of the house

2. I have an extra $19,360 in cash that I will save/invest

3. Doing the math, this looks like I’ll be paying $1260/month (9% on $168,000)

4. Take the $1260 and make my $850/month payments to my 1st mortgage

5. This leaves me with $410 payments, which is why I’m confused about the $160/month that you mentioned. Why would I only pay interest on the $19,360?

House is worth $210,000.0Mortage Balance $148,640.0Current Equity $ 61,360.80% CLTV HELOC $168,000.0IO Loan payment $ 1,260Payment to 1st mortga $ 850Payment to HELOC $ 410

I'm still not seeing the big picture here (btw Random is on vacation and should be back later today so I'm posting for him ).My question is WHY do you want to do this??? You say its to save cashflow. But you don't appear to need the cash - or even have a good place to put it, so you're basically robbing Peter to pay Paul. If you're even considering doing the above you do realize that you'd have to put that money somewhere where it will earn >9% (or whatever your rate on your HELOC) to come out ahead. Not going to happen without significant risk on money you will need short term. Very bad mix.

Please point me to the post where you say what you are planning on doing with the money because I've obviously missed it.

The reason I'm looking into doing it is b/c I will be selling my house in the next 3 years (likely put it on the market in the next year). I have a piece of land that I own outright that I will begin building on. You're right in that I don't need the money, but if there is truely a way to save significantly in the short term with some risk, I'm willing to take the risk as long as I can figure out what that risk is.I appreciate all of the challenges, this is the reason why I posted in the first place

ETA: After reading Pasquino's follow up post, I realize that it doesn't make sense for me to do that

 

[Random]

Got this place under contract last week. It's in a very established "starter home" neighborhood and should resale for mid 90's fairly easily (last sale was for 95K in 05). Its listed as 900sf 1ba but is actually 1400sf 2ba. Its a coinflip on how the agents list that model.

This is going to be our quickest flip yet. We should easily have it turned inside of 8 weeks. Someone had already started updating it, removing everything (cabinets, lights, fixtures) and put in new tile in the kitchen and 1st floor bath. Also put in new windows . Biggest project is going to be undoing their renovation of the garage into a dining room. Its horrible and according to my realtor makes the house harder to sell.

Also got the last flip sold pending inspection. Should know how that turns out next week.

 

[Sabertooth]

Got this place under contract last week. It's in a very established "starter home" neighborhood and should resale for mid 90's fairly easily (last sale was for 95K in 05). Its listed as 900sf 1ba but is actually 1400sf 2ba. Its a coinflip on how the agents list that model.

This is going to be our quickest flip yet. We should easily have it turned inside of 8 weeks. Someone had already started updating it, removing everything (cabinets, lights, fixtures) and put in new tile in the kitchen and 1st floor bath. Also put in new windows . Biggest project is going to be undoing their renovation of the garage into a dining room. Its horrible and according to my realtor makes the house harder to sell.

Also got the last flip sold pending inspection. Should know how that turns out next week.

Excellent looking property. The nice thing to a flipper is when the demo is already half done. Turns off most buyers immediately. I hope your contract goes through on the other one. Is that the place you were considering renting?

 

[Random]

Got this place under contract last week. It's in a very established "starter home" neighborhood and should resale for mid 90's fairly easily (last sale was for 95K in 05). Its listed as 900sf 1ba but is actually 1400sf 2ba. Its a coinflip on how the agents list that model.

This is going to be our quickest flip yet. We should easily have it turned inside of 8 weeks. Someone had already started updating it, removing everything (cabinets, lights, fixtures) and put in new tile in the kitchen and 1st floor bath. Also put in new windows . Biggest project is going to be undoing their renovation of the garage into a dining room. Its horrible and according to my realtor makes the house harder to sell.

Also got the last flip sold pending inspection. Should know how that turns out next week.

Excellent looking property. The nice thing to a flipper is when the demo is already half done. Turns off most buyers immediately. I hope your contract goes through on the other one. Is that the place you were considering renting?

It is. The applicants I had planned to rent to couldn't verify any income. That and I started to get cold feet on renting, so I decided to give the house more time to sell.

 

[Rattle and Hum]

Need help with tax implications. I'll try to be brief.

We have the house (unless it goes to someone else first) for $20K.

Needs $40K to rehab, close twice, carry.

I will buy this for for cash. My partner will pay for rehab. We will both be on the title.

Once completed (four weeks), I will refi entire project and he will QC on the title making me 100% owner ant mortgagee. His angle is that part of the $40K mentioned above is $5,000 I am paying him for his money, time, and rehab contacts (I do not have skillz).

The question for me is how I consider this for taxes? Is this simply a purchase that I made for $60K with that being my cost basis? Any other present-year tax issues I should know about if I do this?

Thanks for reading.

 

[Random]

My first experience with a home inspection follows. And I must note its now more than 24hrs since I first received the report so I can finally post without worry of a FBG vacation.

So, yesterday afternoon I received a call from my realtor informing me she had just received a copy of the inspection report and that it was basically the worst one she's seen in her 20+ years of selling real estate. I'm like wtf, can you fax it to me? She does and I immediately call her and my brother to meet me at the property to go over each addendum the buyer wants done.

We start going over each one:

1 Replace chimney cap - brother verifies the chimney cap was probably not up to code and that replacing it is no problem

2 Replace vent stack to 8-12 inches above roof - ok we can do that with pvc

3 Repair visible hole in roof along dormer - this is where we started thinking huh? We put a completely new roof on (boards and up), had torrential downpours last week (without any evidence of a leaky roof) and are pretty certain we would know if the roof had a hole. But we'll check into it.

4 Add drain pipe to hot water heater - ok no biggie

5 Install covers on junction boxes in basement - no problem

6 Remove extension cord wiring to garage door opener and install proper outlet - this was our second wtf? Brand new garage door, brand new opener, plugged into proper outlet, wired properly. Had absolutely no clue where this came from.

7 Repair leak in bathroom sink - Ok, the sink didn't leak last we checked, so we let the water run in all sinks in the house for 5+ minutes, no leak. Again WTF?

***This is when I asked to see the actual report and at the very end of the summary something caught my eye. The section is called deferred cost items and it listed the hot water heater and said that it was a 15 year old unit and is nearing the end of its typical service life. The fact is I BOUGHT THE ####### HOT WATER HEATER 4 MONTHS AGO. I got pissed. My realtor got scared. We continued on with the addendum.

8 Vent exhaust fans to the outside - nope, not doing that. If they want it done we'll add it to the purchase price.

9 Repair double tapped circuits - went and checked the breaker, no double tapped circuits.

10 Repair outlet in bedroom that is wired backwards - checked all bedrooms, all circuits ok.

11 Repair wire blocking access to breaker box - no problem

So we start discussing the BS items in the report. There were a ton that were not relevant to the property. So I ask my realtor if maybe the report got switched up with another one? Nope, the attached pictures were of the right house. So I am beside myself at this point. She thought for sure the contract would have fallen through, but to her surprise the buyer only picked out the above 11 items, most of which were flat out wrong.

She calls the buyers agent to discuss the addendum, points out the BS ones and says she is going to contact the buyer to pass on the info. We wrap things up at the house and tell her we will start fixing the things we say we will Sat am. But before my realtor leaves I tell her I want the phone # of the scum that did this "inspection".

She calls back within an hour with his number. I'm still irate, and decide not to call until I calm down A LITTLE. About an hour later I call him. Conversation goes something like this:

Me: Hi I'm random and you did a home inspections on my house last week at Fulton St. Do you recall doing this?

Him: Yes, I recall

Me: We seem to have some major problems I'd like to go over with you

Him: Ok, like what

Me: Lets start with the hot water heater you have in your report as being 15 years old. I have the receipt in front of me from 3 months ago. How do you mistake a 3 month old hot water heater for a 15 year old one.

Him: I didn't put that in there.

Me: Well, I'm looking right at it.

Him: That shouldn't be in there. Maybe it got in there by accident. I can resubmit the report with the correction if you'd like.

Me: Well thats not the only problem. You also have in there that our garage door opener is wired with a extension cord.

Him (starting to sound less calm): Um, I think you may have the wrong report. Maybe the realtor got stuff mixed up.

Me: Well the pictures match our house. And some of your findings in the report match things we need to fix.

Him (freaking out): Um, oh no, oh gosh, This is a disaster, we got this new program and I think I may have clicked some of the wrong boxes or double clicked...............blah blah blah. How do you want me to fix this?

Me: I'll get back with you on that, but be certain this is not over, and I will contact your licensing agency regarding your complete incompetence. I told he will not be charging for that pos he called an inspection report and he agreed he would not charge for it.

He apologizes over and over and we hang up. I call my realtor back to let her know he admitted the report was full of errors. She then passed that on to the buyers agent who passed that on to the buyers. They wanted to go through the house again to check things out for themselves and asked that I be there.

So my brother and I get there at the ######## of dawn this morning to hammer out everything we said we'd do. We make a list head to Menards, get back and it starts freezing raining. So we do the inside stuff and go home (actually he went to the doodlebops today so we couldn't even finish when the weather broke).

Later in the afternoon I meet up with the buyer and their agent at the house. We go over everything (the BS stuff, the stuff we fixed this morning, the stuff we will do, and the thing we wont do), tell them we will finish up tomorrow (we had the chimney cap & roof cement right there for them to see) and there agent asks if they want the inspector to come back or order a new one. They said they were satisfied with what I have done and what we are going to do tomorrow, he takes my word it was done right, and says no further inspection is necessary.

Realtor said everything is in place and we should close by Friday.

Is real estate always this fun?

 

[Sabertooth]

My first experience with a home inspection follows. And I must note its now more than 24hrs since I first received the report so I can finally post without worry of a FBG vacation.So, yesterday afternoon I received a call from my realtor informing me she had just received a copy of the inspection report and that it was basically the worst one she's seen in her 20+ years of selling real estate. I'm like wtf, can you fax it to me? She does and I immediately call her and my brother to meet me at the property to go over each addendum the buyer wants done.We start going over each one:1 Replace chimney cap - brother verifies the chimney cap was probably not up to code and that replacing it is no problem2 Replace vent stack to 8-12 inches above roof - ok we can do that with pvc3 Repair visible hole in roof along dormer - this is where we started thinking huh? We put a completely new roof on (boards and up), had torrential downpours last week (without any evidence of a leaky roof) and are pretty certain we would know if the roof had a hole. But we'll check into it.4 Add drain pipe to hot water heater - ok no biggie5 Install covers on junction boxes in basement - no problem6 Remove extension cord wiring to garage door opener and install proper outlet - this was our second wtf? Brand new garage door, brand new opener, plugged into proper outlet, wired properly. Had absolutely no clue where this came from.7 Repair leak in bathroom sink - Ok, the sink didn't leak last we checked, so we let the water run in all sinks in the house for 5+ minutes, no leak. Again WTF?***This is when I asked to see the actual report and at the very end of the summary something caught my eye. The section is called deferred cost items and it listed the hot water heater and said that it was a 15 year old unit and is nearing the end of its typical service life. The fact is I BOUGHT THE ####### HOT WATER HEATER 4 MONTHS AGO. I got pissed. My realtor got scared. We continued on with the addendum.8 Vent exhaust fans to the outside - nope, not doing that. If they want it done we'll add it to the purchase price.9 Repair double tapped circuits - went and checked the breaker, no double tapped circuits.10 Repair outlet in bedroom that is wired backwards - checked all bedrooms, all circuits ok.11 Repair wire blocking access to breaker box - no problemSo we start discussing the BS items in the report. There were a ton that were not relevant to the property. So I ask my realtor if maybe the report got switched up with another one? Nope, the attached pictures were of the right house. So I am beside myself at this point. She thought for sure the contract would have fallen through, but to her surprise the buyer only picked out the above 11 items, most of which were flat out wrong.She calls the buyers agent to discuss the addendum, points out the BS ones and says she is going to contact the buyer to pass on the info. We wrap things up at the house and tell her we will start fixing the things we say we will Sat am. But before my realtor leaves I tell her I want the phone # of the scum that did this "inspection".She calls back within an hour with his number. I'm still irate, and decide not to call until I calm down A LITTLE. About an hour later I call him. Conversation goes something like this:Me: Hi I'm random and you did a home inspections on my house last week at Fulton St. Do you recall doing this?Him: Yes, I recallMe: We seem to have some major problems I'd like to go over with youHim: Ok, like whatMe: Lets start with the hot water heater you have in your report as being 15 years old. I have the receipt in front of me from 3 months ago. How do you mistake a 3 month old hot water heater for a 15 year old one.Him: I didn't put that in there.Me: Well, I'm looking right at it.Him: That shouldn't be in there. Maybe it got in there by accident. I can resubmit the report with the correction if you'd like.Me: Well thats not the only problem. You also have in there that our garage door opener is wired with a extension cord.Him (starting to sound less calm): Um, I think you may have the wrong report. Maybe the realtor got stuff mixed up.Me: Well the pictures match our house. And some of your findings in the report match things we need to fix.Him (freaking out): Um, oh no, oh gosh, This is a disaster, we got this new program and I think I may have clicked some of the wrong boxes or double clicked...............blah blah blah. How do you want me to fix this?Me: I'll get back with you on that, but be certain this is not over, and I will contact your licensing agency regarding your complete incompetence. I told he will not be charging for that pos he called an inspection report and he agreed he would not charge for it.He apologizes over and over and we hang up. I call my realtor back to let her know he admitted the report was full of errors. She then passed that on to the buyers agent who passed that on to the buyers. They wanted to go through the house again to check things out for themselves and asked that I be there.So my brother and I get there at the ######## of dawn this morning to hammer out everything we said we'd do. We make a list head to Menards, get back and it starts freezing raining. So we do the inside stuff and go home (actually he went to the doodlebops today so we couldn't even finish when the weather broke).Later in the afternoon I meet up with the buyer and their agent at the house. We go over everything (the BS stuff, the stuff we fixed this morning, the stuff we will do, and the thing we wont do), tell them we will finish up tomorrow (we had the chimney cap & roof cement right there for them to see) and there agent asks if they want the inspector to come back or order a new one. They said they were satisfied with what I have done and what we are going to do tomorrow, he takes my word it was done right, and says no further inspection is necessary. Realtor said everything is in place and we should close by Friday.Is real estate always this fun?

You are going to be so pissed if this falls through. I for one hope it goes smoothly from here on out for you.

 

[Random]

Got this place under contract last week. It's in a very established "starter home" neighborhood and should resale for mid 90's fairly easily (last sale was for 95K in 05). Its listed as 900sf 1ba but is actually 1400sf 2ba. Its a coinflip on how the agents list that model.

This is going to be our quickest flip yet. We should easily have it turned inside of 8 weeks. Someone had already started updating it, removing everything (cabinets, lights, fixtures) and put in new tile in the kitchen and 1st floor bath. Also put in new windows . Biggest project is going to be undoing their renovation of the garage into a dining room. Its horrible and according to my realtor makes the house harder to sell.

Also got the last flip sold pending inspection. Should know how that turns out next week.

Friggin bank sold me a property they dont even own yet. Gonna take a while to get possession. :X

 

[moleculo]

So I'm working on a re-location, and want to begin the process of putting my house on the market as soon as my offer letter comes in and everything is in order, which should by next week or so. I have a few things which really need to be done first, including replace rotten wood in gables, exterior paint, re-do bathroom (in process of right now), and a few other minor projects which need to be done. I probably need to spend about $5K to get the house to a level where I can get top dollar for it.

I was talking with my neighbor yesterday, and he mentioned that his kids might be interested in buying the house. That would be ideal for them, as they are over there all the time anyways - I think my neighbor babysits the grandkids during the day, etc.

I'm thinking that if I have a buyer lined up before putting it on the market, I might not have to finish up these projects - I maybe can just knock $5k off of the price and let them finish up all of these things. Bottom line is I would save myself the Realtors fees and the headache and hassle of putting it on the market.

If I should go this route, any tips/recommendations on how to handle the sale? How would this work? How does one establish a fair market value? I don't want to rip them off, and I don't want to give the house away, either.

TIA

 

[Sabertooth]

Got this place under contract last week. It's in a very established "starter home" neighborhood and should resale for mid 90's fairly easily (last sale was for 95K in 05). Its listed as 900sf 1ba but is actually 1400sf 2ba. Its a coinflip on how the agents list that model.

This is going to be our quickest flip yet. We should easily have it turned inside of 8 weeks. Someone had already started updating it, removing everything (cabinets, lights, fixtures) and put in new tile in the kitchen and 1st floor bath. Also put in new windows . Biggest project is going to be undoing their renovation of the garage into a dining room. Its horrible and according to my realtor makes the house harder to sell.

Also got the last flip sold pending inspection. Should know how that turns out next week.

Friggin bank sold me a property they dont even own yet. Gonna take a while to get possession.

WTF? Did they sell you a second mortgage or something? Weak.

 

[Sabertooth]

So I'm working on a re-location, and want to begin the process of putting my house on the market as soon as my offer letter comes in and everything is in order, which should by next week or so. I have a few things which really need to be done first, including replace rotten wood in gables, exterior paint, re-do bathroom (in process of right now), and a few other minor projects which need to be done. I probably need to spend about $5K to get the house to a level where I can get top dollar for it.I was talking with my neighbor yesterday, and he mentioned that his kids might be interested in buying the house. That would be ideal for them, as they are over there all the time anyways - I think my neighbor babysits the grandkids during the day, etc.I'm thinking that if I have a buyer lined up before putting it on the market, I might not have to finish up these projects - I maybe can just knock $5k off of the price and let them finish up all of these things. Bottom line is I would save myself the Realtors fees and the headache and hassle of putting it on the market.If I should go this route, any tips/recommendations on how to handle the sale? How would this work? How does one establish a fair market value? I don't want to rip them off, and I don't want to give the house away, either.TIA

I'd find an attorney to do the closing. Fair market value is found be using comparables or "comps." That's really all there is too it. What have similar homes in terms of size, yard size, bedrooms, bathrooms, age, and condition selling for? Look on you realty websites. When the buyers attempt to buy it, they will need to get an appraisal done. Most banks will require this for financing. This will give you an idea as well. You could pay $200-$400 to get an appraisal done beforehand as well.

 

[Random]

Got this place under contract last week. It's in a very established "starter home" neighborhood and should resale for mid 90's fairly easily (last sale was for 95K in 05). Its listed as 900sf 1ba but is actually 1400sf 2ba. Its a coinflip on how the agents list that model.

This is going to be our quickest flip yet. We should easily have it turned inside of 8 weeks. Someone had already started updating it, removing everything (cabinets, lights, fixtures) and put in new tile in the kitchen and 1st floor bath. Also put in new windows . Biggest project is going to be undoing their renovation of the garage into a dining room. Its horrible and according to my realtor makes the house harder to sell.

Also got the last flip sold pending inspection. Should know how that turns out next week.

Friggin bank sold me a property they dont even own yet. Gonna take a while to get possession.

WTF? Did they sell you a second mortgage or something? Weak.

No, they just dont have the title transferred yet.

 

[Random]

Sabertooth - you start your rehab yet?

 

[Sabertooth]

Sabertooth - you start your rehab yet?

Closing got bumped out to the 15th of April. In a holding pattern. I have a lot of the work lined up though. I expect to put about 25k into it, giving me about $50k total in it. Then I believe it will sell for around $80k. So after realtor fees and stuff, probably about 73k left over. So $23k in profits give or take. I am going to shoot for $25k in profits though.

 

[Random]

Sabertooth - you start your rehab yet?

Closing got bumped out to the 15th of April. In a holding pattern. I have a lot of the work lined up though. I expect to put about 25k into it, giving me about $50k total in it. Then I believe it will sell for around $80k. So after realtor fees and stuff, probably about 73k left over. So $23k in profits give or take. I am going to shoot for $25k in profits though.

Cool, hope all goes as planned.How much of the 25K would you say you are paying by hiring out the work? Or asked another way, what would you guess you would have in it if you did all the work yourself?

 

[Sabertooth]

Sabertooth - you start your rehab yet?

Closing got bumped out to the 15th of April. In a holding pattern. I have a lot of the work lined up though. I expect to put about 25k into it, giving me about $50k total in it. Then I believe it will sell for around $80k. So after realtor fees and stuff, probably about 73k left over. So $23k in profits give or take. I am going to shoot for $25k in profits though.

Cool, hope all goes as planned.How much of the 25K would you say you are paying by hiring out the work? Or asked another way, what would you guess you would have in it if you did all the work yourself?

The $25k is what I should have for myself when all is said and done. I am hiring out the roofing ($2500 labor), siding ($2500 labor), electrical ($3500), and drywall ($2000 labor). I got all of my bids with materials and labor listed seperately so I could double check their numbers. I've looked through about 5 or 6 contractors on each aspect. So far I don't have a person for my siding and roofing, but I know the materials costs are about $2500 for each. So I figure I can get those both done for about $10k between materials and labor. The drywall I may still do myself, not sure. I don't like mudding one bit, but if I can't get the whole place sheeted, mudded, and textured for $5k, I'll do it myself.

 

[Random]

Sabertooth - you start your rehab yet?

Closing got bumped out to the 15th of April. In a holding pattern. I have a lot of the work lined up though. I expect to put about 25k into it, giving me about $50k total in it. Then I believe it will sell for around $80k. So after realtor fees and stuff, probably about 73k left over. So $23k in profits give or take. I am going to shoot for $25k in profits though.

Cool, hope all goes as planned.How much of the 25K would you say you are paying by hiring out the work? Or asked another way, what would you guess you would have in it if you did all the work yourself?

The $25k is what I should have for myself when all is said and done. I am hiring out the roofing ($2500 labor), siding ($2500 labor), electrical ($3500), and drywall ($2000 labor). I got all of my bids with materials and labor listed seperately so I could double check their numbers. I've looked through about 5 or 6 contractors on each aspect. So far I don't have a person for my siding and roofing, but I know the materials costs are about $2500 for each. So I figure I can get those both done for about $10k between materials and labor. The drywall I may still do myself, not sure. I don't like mudding one bit, but if I can't get the whole place sheeted, mudded, and textured for $5k, I'll do it myself.

I was referring to the bolded. Thanks, you answered my question.

 

[Random]

Anyone know anything about this?

The plan also contains $4 billion in grants to local governments to buy and refurbish foreclosed homes, new authority for states to issue bonds to be used to refinance subprime mortgages — those made to borrowers with poor credit — and a $7,000 tax credit for people buying properties in foreclosure.

Link