Posted on: 10th Jun, 2008 03:04 am
i have a friend who owns several rental properties some that are paid for others not. he wants to give me the ones that are paid for, take the equity out of them, and give him the money so he can buy down the other properties. can this be done? what kind of sale would this be and would i be hit by taxes? he cant do it because his credit is bad.
Welcome Cjkkk,
Will it be comfortable for you to buy more than one property? and how many properties is your friend willing to sell you? frankly speaking I dont understand what kind of a transaction it is. Seems too complicated. Until and unless you have the finance, it's better that you avoid it.
Will it be comfortable for you to buy more than one property? and how many properties is your friend willing to sell you? frankly speaking I dont understand what kind of a transaction it is. Seems too complicated. Until and unless you have the finance, it's better that you avoid it.
I'm not sure what kind of sale this would be either. When you say he wants to "give" the properties to you do you mean he's going to sign them over to you?
If you are to take the equity out do you sell these properties and then turn the profits over to him?
You probably should consult a tax advisor regarding the income taxes - it sound like you'll be liable for property taxes at the very least.
If you are to take the equity out do you sell these properties and then turn the profits over to him?
You probably should consult a tax advisor regarding the income taxes - it sound like you'll be liable for property taxes at the very least.
hi cjkkk,
the answer to your question, is that it is a creative sale. as far as i see it, as long as he is willing to compensate you for your flexibility, and the terms on the refinance loan that you can achieve are agreeable to you, then go for it.
this is a tricky question because it is basically just a sale like any other. he is just structuring it as a refinance so that you don't have out come out of pocket with any down pymt monies.
as in any property exchange, you are responsible for paying the taxes for the months you have owned the home. that is all worked out through the refinance and the sales price.
i think your biggest challenge may be finding a good rate. purchase money on an investment is a lot cheaper than c/o refi money on an investment.
good luck!
the answer to your question, is that it is a creative sale. as far as i see it, as long as he is willing to compensate you for your flexibility, and the terms on the refinance loan that you can achieve are agreeable to you, then go for it.
this is a tricky question because it is basically just a sale like any other. he is just structuring it as a refinance so that you don't have out come out of pocket with any down pymt monies.
as in any property exchange, you are responsible for paying the taxes for the months you have owned the home. that is all worked out through the refinance and the sales price.
i think your biggest challenge may be finding a good rate. purchase money on an investment is a lot cheaper than c/o refi money on an investment.
good luck!
Simple real-estate financing just not the standard but sounds like a great opportunity to make money. The bottom line is your friend is a real estate investor who has fallen on hard time and he is in an ill quid investment which happens all the time to people who are not used to a term known as diversification
So what has happened is your friend is desperate to get access to the cash that is within his properties which has turned out to be a tremendous opportunity for you just because you have good credit. I will walk you through this and you will make money. However, remember even though he is your friend this is a business transaction and you must not treat it as helping a friend!
First, every rental property that he wants to give you needs to be in your name only. Next, you need to make sure they have renters in them and make sure they are all under lease (preferably under 1 yr leases). Finally, plan on three months out of the year not having rental income on one of the properties and make sure to have cash set aside to make the new mortgage payment. You can obtain this cash reserve by pulling it out when you refinance the house to pay your friend. Should not be any tax implications because you have not gain. This is what makes the deal all the more sweeter for you!
Negotiations:
1) I would start at 70% tell your friend you are willing to take the properties but, you will only take them at 70% of what they are worth. In other words when you refinance you will only give him 70% of the properties appraised value. If he does not agree then I would go as high as 80% any higher than that youre great deal has turned into a “bad deal.
2) Under no circumstances purchase these properties for over 80% of there appraised value!
This could be structured other ways but, this is the easiest and most beneficial way for you. Remember this is your friend but, what you are dealing with is a business decision and you must not treat it a friendly decision. No matter how bad you want to help your friend it does not benefit you for him to give you the properties and then refinance all the equity out. You must make money on your time, risk you are taking and your good credit.
This is as simple as I can write it but, if you have more questions just post them and I will continue to walk you through this process.
:D
So what has happened is your friend is desperate to get access to the cash that is within his properties which has turned out to be a tremendous opportunity for you just because you have good credit. I will walk you through this and you will make money. However, remember even though he is your friend this is a business transaction and you must not treat it as helping a friend!
First, every rental property that he wants to give you needs to be in your name only. Next, you need to make sure they have renters in them and make sure they are all under lease (preferably under 1 yr leases). Finally, plan on three months out of the year not having rental income on one of the properties and make sure to have cash set aside to make the new mortgage payment. You can obtain this cash reserve by pulling it out when you refinance the house to pay your friend. Should not be any tax implications because you have not gain. This is what makes the deal all the more sweeter for you!
Negotiations:
1) I would start at 70% tell your friend you are willing to take the properties but, you will only take them at 70% of what they are worth. In other words when you refinance you will only give him 70% of the properties appraised value. If he does not agree then I would go as high as 80% any higher than that youre great deal has turned into a “bad deal.
2) Under no circumstances purchase these properties for over 80% of there appraised value!
This could be structured other ways but, this is the easiest and most beneficial way for you. Remember this is your friend but, what you are dealing with is a business decision and you must not treat it a friendly decision. No matter how bad you want to help your friend it does not benefit you for him to give you the properties and then refinance all the equity out. You must make money on your time, risk you are taking and your good credit.
This is as simple as I can write it but, if you have more questions just post them and I will continue to walk you through this process.
:D
So long as you end up with the homes you are doing a purchase. I can not think of any reason why you would not want to structure it as a sell with a contract to protect you. Now if the plan is to let you buy them and then give them back while he pays the note I would run as this is putting your name on his stuff and is fraudulent. You have not said that is what is going on nor am I suggesting but in case it is I wouldnt do it.
The only way to finance is to do everything above the board. Deception of a lending institution can sometimes lead to orange jump suits in the summer time... very out of fashion...
Good luck hope it all works out
Brian
The only way to finance is to do everything above the board. Deception of a lending institution can sometimes lead to orange jump suits in the summer time... very out of fashion...
Good luck hope it all works out
Brian
Good Point Brian. :D