Posted by Kevin Subbert on December 01, 2000 at 01:32:18:
I dont know anything about estate taxes but I believe that if the daughter had the house willed to her and then agreed to carry the financing that only the principle portion of the payments would be subject to estate tax. The interest would be taxed as income. I asked a similar question to this in a previous thread. Please domt hold me to this, Im just going from memory from the responses I recieved. Somebody will correct me if Im wrong.
I have located a motivated seller. He is 90 and recently moved into a duplex with his sickly wife. I talked with his daughter.
The home is free and clear. Vacant. He has the house priced at $145k, which matches up with the comps in the neighborhood, but I learned from his daughter that they arrived at this price considering the improvements that they were going to make … which they never did.
They are looking for someone to purchase it, fix-it-up, and live in it or sell it.
She believes he will sell around $120k. She informs me that he is not interested in owner financing … but when I asked about how the money would be passed along to her when they pass on … I got her attention. It appears as if she would not mind financing such a deal and receiving a check each month for the next thirty years, but it is her father I have to sell (in order to buy.)
I’m posting this … cause I want to know how this might be put together. Is there a way that the home can be put into a trust or something that might defer the tax consequences on this sale? Something that the daughter may benefit from?
For example: Can the owner put the home into a trust that the children control or inherit when he passes, then I can purchase the home from the trust (children)? The daughter appeared as if owner financing would be agreeable to her … especially when I mentioned she could receive a check each month for 20 - 30 years!
I was thinking I could offer them $120k with nothing down, citing that I need my cash to make the necessary improvements. I would make the minor improvements, then sell it for $145k. I would simply have to recover my cash in plus a profit.
You can get them to owner finance with little or nothing down. You can then sell that note or some portion to get them some amount of cash. They can carry a second. The note can be 15 year amortization for more cash flow for them.
The daughter can get a stepped up value on the property when inherited. They can get the proceeds tax free if they sell.
A derivation is to have them put a mortgage on the property then L/O it or have it put in a PACtrust type arrangement. Many solutions good for both them and you.
Posted by BillW. on December 01, 2000 at 06:10:50:
It seems like the daughter is the motivated one here, not the father. It looks like they’ve priced it at market and he wants all cash…
He seems content and able to let the house sit vacant.
Your idea about inheritance tax probably isn’t applicable since the first 625,000 or so is passed free of taxes. This probably won’t help in your negotiations.
Also, the spread between 120 and 145K is pretty thin. Repairs can chew up more money than you think and holding costs are higher.
Why not try a 90 day option and then try to find a buyer, sell the option to the new buyer and make a few thousand and move to the next deal.
Good luck …BillW.