Posted by Brent_IL on February 12, 2002 at 12:28:11:
The taxes don’t affect you, they affect your offer.
I’m not totally up to date on estate taxes. The IRS may accept a very limited installment arrangement. There might be a few flower bonds floating around, also.
Someone?s taxable estate is their gross estate less allowable deductions. An estate tax applies to the taxable estate at time of death. Your gross estate includes the value of all property in which you had an interest at the time of death. This includes property that you transferred within 3 years prior to your death. Dependant upon the ownership, life insurance can be included, too. You can exclude things like current debts, funeral expenses, and, if you?re married, a marital deduction. Everyone is eligible for a unified credit that, if they haven?t used up in gifting, can be applied to the taxes due. I think anything else has to be paid in a short time, like nine months.
Seller-financing features money received over time. The estate taxes are due now. That?s why an executor might accept cash now in lieu of profits later.
The cash doesn’t have to come from the property if it’s available from some other source. Some times the property is all there is.
There’s a 4 family bldg on the same block where I reside on sale thru a local realtor. This is a Estate property. I don’t see a positive cash flow, but, still hoping, maybe I did something wrong and/or missing more pertinet info. I would like to buy this No money down, but don’t exactly know how to approach it.
Owner Deceased, property is in Estate now.
Price: $339,000
Garage: No
of BR: 3 units with 2 BR and 1 unit with a 1 BR.
Basement: Old finished, not liviable though
Lot Size: 24 x 100
House: 20 x 80
Appliances: Refrig and Stove included
How long on Market: 2 months
Rental Income: 750 + 750+750+650 = 34,800
No lease signed by any tenants
House is fully paid/clear, no mtge nor any exising financing
Expenses: approx. 13,900 (40% of gross rental income)
Some listed expenses are:
Tax:3,000, Heating:4,000, Water/Sewer:800, Full Ins:1,500
The 1 BR unit tenant will be leaving in a month or two. I plan to move in.
Question:
Is this worth pursuing?
How can I make an offer with no money down, or very little money down?
Should I make the tenant sign a lease and also increase the rent? If I increase rent, by how much?
What price and term offer should I make to broker?
Posted by Zack W on February 10, 2002 at 15:58:52:
Paul,
1] Maybe
2] An FHA mortgage will finance 97.75 of your purchase price. They will allow 6% seller help. If you intend to occupy one of the units this may be the way to go. There are even programs FHA recognizes that will allow the seller to “gift” you the down payment required.
3] Absolutely. You need signed leases and if rents are below market, raise’em. How much? Whatever market rent in your area is, make adjustment for heating.
4] With the numbers you present, a 5% vacancy factor, advertising, legal, repairs and maitenance, and misc, I came up with $250,000 as your break even, meaning no loss/gain.
Posted by Brent_IL on February 10, 2002 at 13:50:09:
Before you can make a good offer on an estate property, it’s crucial that you or your realtor talk to the executor to find out how the estate taxes are being paid. If the money has to come from the property, they may be more agreeable to a low ball cash offer than to some kind of seller-financing arrangement.
Thanks for your input. For Question#1, you said maybe. If my break even price is $250,000 (for the current figures I given) How would this be worth buying?
I am planning to ask if the executor would consider seller’s financing and I would pay the full asking price of $339,000.
a) would this be wise to make this kind of offer? Especially if this property is in a negative cash flow at this price?
b) what rate and terms should I suggest?
c) Would I ask the realtor to have the tenants sign leases before I take the property over or do I wait until I own it and raise the rents and then require them to sign the lease?
Can you explain what ways the estate tax can be paid? And how would the various ways affect the buyer (me)?
If the $$ comes from the property, why would it be more agreeable to the executor to a low cash offer (like how much??) than seller’s financing?
Posted by Zack W on February 12, 2002 at 22:48:06:
Paul,
a] No, at full asking price this property is not a deal. Seller financing alone is not a reason to buy. I have e-mailed you an excell spreadsheet I use to evaluate income properties.
b] I dont know the answer to that question. Find out what the seller needs, and if you can give it to him, it might work, but not at full asking price.
c] I personally would not want to trust another to rewrite my future leases. You write them.