Ed and Other Gurus- Need Timely Advice : ) - Posted by dknj23

Posted by dknj23 on January 12, 2004 at 10:33:47:

No Gurus out there???

Ed and Other Gurus- Need Timely Advice : ) - Posted by dknj23

Posted by dknj23 on January 12, 2004 at 08:24:14:

I am looking into doing a subject to do. I have found a motivated seller and will present to her the workings of the subject to deal.

Once she deeds the property to me obviously I go out and try to sell it quickly. When I find my end buyer, I can either sell it outright or I can do a lease purchase. Can I also owner finance this place charging a little more than the rate I will be paying? If so I heard I should use a loan servicnig company as they will account for interest paid for the year for tax purposes.

Obviously if I still have the property subject to than the person on record is still the original homeowner and will be credited with the interest, when I create this wraparound mortgage how does this new buyer get credit for interest paid? How can the new buyer get tax breaks?

Lastly what happens when I sell a property outright that was subject to for tax purposes? Since the owner deeded her proerty to me does she pay taxes only on what she realized (her equity) and then when I go to sell, I would be paying on just my gains?

Thanks

Re: Ed and Other Gurus- Need Timely Advice : ) - Posted by Ed Garcia

Posted by Ed Garcia on January 13, 2004 at 09:57:20:

Dknj23,

Your Question:

Once she deeds the property to me obviously I go out and try to sell it quickly. When I find my end buyer, I can either sell it outright or I can do a lease purchase. Can I also owner finance this place charging a little more than the rate I will be paying?

Answer:

Yes.

Question:

If so I heard I should use a loan servicing company, as they will account for interest paid for the year for tax purposes.

Answer:

I agree, I think who ever told you that gave you a good suggestion although that?s optional because when you wrap the loan; you can set your terms up interest only short term or anyway you want to. They don?t have to coordinate with the existing loan.

Question:

Obviously if I still have the property subject to than the person on record is still the original homeowner and will be credited with the interest, when I create this wraparound mortgage how does this new buyer get credit for interest paid? How can the new buyer get tax breaks?

Answer:

The new buyer can get credit for any interest that they pay on the loan. Obviously that will be determined between you and the buyer. They?ll have to maintain their record of interest paid given by you. I recommend that you check with your accountant or CPA on this portion of your post, so that they can tell you how to structure it and show the income coming from the rate differential you?ll be getting from the loan as well as the profit you?ll be getting from the sale of the property.

Question:

Lastly what happens when I sell a property outright that was subject to for tax purposes? Since the owner deeded her property to me, does she pay taxes only on what she realized (her equity) and then when I go to sell, I would be paying on just my gains?

Answer:
When the previous owner sold the property to you. Her tax base was from what she paid for it to what she sold it to you for.

The same principal applies to you. When you sell it, your profit will be based on your agreed price of purchase to your agreed price of sale.

I hope that I?ve helped you,

Ed Garcia