Posted by dutch on April 10, 2006 at 14:05:43:
First, understand that the IRS will want to tax you on the gift as income, the value of the property. So for that purpose, it is in your interest to want a LOW value.
To borrow against it (to pay the taxes?), it is in your interest to get a HIGH value, so you can borrow more.
Most people start with an appraisal.
Dutch
OKHomesavers
Need info on Equity - Posted by Rondell
Posted by Rondell on April 10, 2006 at 13:07:26:
I am recieving the deed to from a homeowner as a gift. The homeowner has never borrowed against the property. After the deed is transferred over, how do I borrow against the property to get more cash flow. Anybody?
Re: Need info on Equity - Posted by John Corey
Posted by John Corey on April 10, 2006 at 18:07:47:
Rondell,
Be careful about moving too fast.
Cash flow comes from the income the property produces. Gross cash flow would be before expenses. Net operating income is the cash flow after all expenses and allowances for future repairs.
Hence borrowing money does not help cash flow. The monthly loan payment will actually reduce the cash flow.
I assume you want to borrow against the property so you can invest the funds released. That would be pulling out equity.
As Dutch noted you will have some issues related to the gain from the gift. Hence you might owe taxes the day you receive the property (before you even take out a loan). Get some tax advice as to the best way to handle the transfer so that both parties are well positioned.
John Corey