FREE BEACH HOUSE!!! - Posted by Don

Posted by Dave T on February 08, 2002 at 24:19:22:

I think you are in the perfect position to solve this seller’s problem. Since your seller inherited the property, let’s assume that it is owned free and clear. Let’s also assume that the inheritance was fairly recent and that the appraisal done at the time showed a FMV of more than $110K (let’s use $130K for the sake of example).

Most likely, your seller will not have to pay any capital gains taxes when you purchase the property. Since the seller inherited the property at its FMV at the death of the bequestor (also her cost basis), the seller will only have capital gains taxes due on any profits realized over and above her cost basis. If the cost basis is really $130K and she sells to you for $110K, the seller has a capital loss to deal with instead of a capital gain.

You say that you are in a sandwich lease option now, meaning that your seller has L/O’d to you and you in turn have L/O’d to a tenant buyer. I am not a L/O expert, but in your position I would want to limit my liability to both the seller and to my tenant-buyer. I would not assign my option position to another investor, as this may not release me from liability under the agreements you have in place.

Instead, why not just exercise your option with the seller. Ask the seller to sell you the property and carry back 100% financing. Convert the seller’s equity to a note secured by a mortgage on the property. The seller is no longer concerned with repairs, maintenance (upkeep), taxes, insurance, utilities, vacancy, or personal liability on this property, but still derives a monthly income for the term of your loan in the form of a mortgage payment. If you default, the seller can foreclose, recover the property and do it all over again.

You in turn now own the property, and achieve greater flexibility with your tenant-buyer. What if your tenant-buyer could not exercise his option, and asked for an extension. You are now in a position to consider it for an additional option fee, whereas you might not have been able to do so previously.

Furthermore, by buying the property for $110K, you get the $30K equity built in, but if you assign your position to an investor, you give most of that equity to the investor.

FREE BEACH HOUSE!!! - Posted by Don

Posted by Don on February 05, 2002 at 18:56:57:

Sorry!..the Guerilla Marketer in me took over
for a second, No beach house, but your opinion
is important!!!..
First off Awsome Site!!! Props to the Admins,
Pros and Gurus who make it work!!!

I’m in a L/O sandwich and need some greatly
appreciated guidance
getting out, I’m the roast beef and I wanna be
holdin’ the baggie! Yes I do intend to get the
Kaiser L/O and/or Bronchek course(s) ASA$P
(glad I didn’t get Sheets). I structured a
deal on a napkin, with a distressed friend,
from what I could remember from some OLD Dave
Del Dotto books (anybody remember him? Ha!)
All is well so far,
2+2 Condo, L.A.,Ca.
140 value
110 negotiated (has flaws, needs cosmetics)
$1,500 Non Refund Consideration Paid
$1,100 Mo.Payment
$400 Mo. Applied to down

I’ve made 10 timely payments, this has been
simple and between friends. She knew I would
fix it and flip it from the start, and I took
care of a problem property she inheirited,
Win/Win…
Now I need the Nuts and Bolts of gettin’ out,
it’s almost like the more I learn the less I
know. I’ve never been to a closing table and
know I have options and of course need to do
it all legally. I can still structure my
option agreement just about any way I need to,
she is easy. She has good equity and is not
greedy. She understands she’ll have Cap. gains
responsability, and wants out.

I also believe I may have a buyer/investor in
the same building, and this could be E-Z flip. I’m not sure how to get paid, should I now “Assign my Option”, this is not what I remember from the old books. I feel like I now need some “hand holding” and talked to a local REI-Club Prez. who gets $100 an hour Consulting Fee, it seems like a good value to me to use her at this point, but thought I’d throw this out to all you that are still with me on this and get some of your valued and respected input.

I also have some realtor frien

Re: FREE BEACH HOUSE!!! - Posted by Dave T

Posted by Dave T on February 07, 2002 at 15:59:57:

You said: “She knew I would fix it and flip it from the start, and I took care of a problem property she inheirited, Win/Win…”

Please help me with the part about inheritance. Did your seller purchase an investment rental and “inherit” some problems, or, did your seller actually inherit the property (and the problems that came with it) and doesn’t want to be a landlord?

How should I interpret your post?

I?ll bring the sun cream?.. - Posted by Lloyd Cook, Los Angeles

Posted by Lloyd Cook, Los Angeles on February 05, 2002 at 19:43:15:

Very nice bate and switch!!! Well, I took the bait anyway. It seems to me that you need to turn your napkin agreement and convert it into a Purchase and Sale agreement that can be taken to an escrow company. You could assign it to an investor, do a wrap loan from the seller or just buy it yourself and get a new loan. The seller could take a second loan for any shortfall you may have, this will help her on her capital gains taxes.

Re: FREE BEACH HOUSE!!! - Posted by Don in Cali~

Posted by Don in Cali~ on February 07, 2002 at 23:20:07:

Hi Dave, the later is correct, she inheirited when her mom passed, and was sick of landlording…D.

Re: Now We’re Cook(in’)… - Posted by Don in Cali~

Posted by Don in Cali~ on February 06, 2002 at 22:04:49:

Thanx LLoyd!..sorry for the B&S, actually I
was using an old formula for direct marketing
respose of A.I.D.A.
Attention (Free)
Interest (beach house)
Desire (to be in the beach house)
Action (someone calls)
I use it to sell anything from used goods to
Sat. T.V. systems, and will use it to market
homes when the time comes. Back to REI, Ha!
Lloyd, pardon my ignorance (but that’s why I’m here!), if I assign my option to a new buyer for a price (seems about $25,000) where does he get the $ from?? Appraisal and Refi?
…a wrap from the seller could work??..
…and I’ll never Qual. for my own loan,
Ha!..how could a second help shortfall
me/her…Argghhhh, I’m so green!
Lloyd, mind if I E-ya direct? it seems you’ve
“ben there, done that” and are local?..Thanx
again for the help and I’m off to the
archives…
Don in Cali.