What do you think? Investor Selling 7 Condos - Posted by Jerry

Real Estate Investing Real Estate Financing
#1

Posted by Dave T on January 31, 2002 at 17:06:38:

Sorry, since you already sold the property, you can not use the remaining balance on your mortgage note in a 1031 exchange transaction. A mortgage note is a personal asset, or perhaps a portfolio asset, but not investment real estate.

You did not say whether the property you sold on contract was your primary residence or a rental property at the time of sale. If it was your primary residence, do you qualify for the $250K capital gains exclusion?

I am not a tax professional and this post reflects my opinion only. Suggest you consult a professional tax advisor for specific details that apply to your financial circumstances.

#2

What do you think? Investor Selling 7 Condos - Posted by Jerry

Posted by Jerry on January 31, 2002 at 14:38:33:

Here’s an email I just received from a Broker I’ve dealt with in the past:

I have an out of state investor wanting to sell his condo props:
SF/Bd/Ba Price Rent/Mo
700/2/1 $45K 550
840/3/1 $50K 557
924/2/1 $40K 430
1005/2/1 $40K 465
1008/3/2 $50K 635
1008/3/1 $50K 650
1008/3/1 $50K 650

Rents are generally below market (in total about $400/mo). The first prop. is now vacant and is being completely renovated (new flooring, paint, repairs, etc). He is asking $325K for the lot with $15K down and he will carry back a note for $310K at 8% interest only with a 3 to 5 year call. His price is at market or a little above.
Call me if interested in making an offer. I will soon list them in the MLS individually.

I’m interested in buying this lot. The financing terms are decent. The properties are in lower-class to lower-middle class areas of my major city, but not in gang-land (maybe with an exception or two).

My strategy would be to buy the lot and keep them rented, but one by one, do the necessary fix-up (carpet/paint) to sell them via L/O.

I’ve asked the broker which condo developments (if any)would not meet FHA reqs for the ratio of owner-occupied versus NOO. If I L/O the properties, I want to know if the tenant/buyer could get an FHA loan to buy it later. Those that I couldn’t sell for this reason or another, I’d keep as rentals. But, I’d want to sell them all if I could.
I just heard about this and haven’t scheduled a viewing of the properties. I asked the broker if he thought the seller would come-down on his price. What do you think? Would you pursue this?

#3

Strenthen the Condo Association… - Posted by Harvey Carroll, Jr.

Posted by Harvey Carroll, Jr. on February 04, 2002 at 19:47:54:

Get the Condo association to put up money/time to rehab the exterior and ask a higher price…
JK

#4

Re: What do you think? Investor Selling 7 Condos - Posted by jim

Posted by jim on January 31, 2002 at 23:20:15:

Why is this investor selling these condos to you and not to individual homeowners? What is the market like to sell these condos to homeowners? In this major city, condos are a very hard sell to homeowners in a blue collar neighborhood, but can usually be sold to investors at a discount.

#5

Re: What do you think? Investor Selling 7 Condos - Posted by Tim Fierro (Tacoma, WA)

Posted by Tim Fierro (Tacoma, WA) on January 31, 2002 at 18:26:49:

Jerry, Call the condo management and find out what the ratio of owner/occupants is. It has been a couple of years since I sold a condo, but I believe here (WA) that the FHA requirement was 70% or 75% owner/occupancy to get funded. Conventional financing is available and I recall a broker who knew of a company who would fund on 65% owner/occupancy.

BTW, only for reference, but I remember about 2 years ago that FHA sent out a letter to mortgage brokers that they ran out of money to fund condos. This was about November if I remember correctly. Any future FHA funded condos would need to wait until after January 1st. I don’t know if there is some limit that FHA does each year or if it was just a fluke, but I remember it happening and I had mine sold a month earlier and was clear. The next one I did though went conventional.

I don’t think that a specific development is the question you need to be asking, but more along the lines of which complexes have a high enough owner/occupancy rate to meet FHA and conventional financing.

#6

Re: Forgot to add: 1031 exchange? - Posted by Jerry

Posted by Jerry on January 31, 2002 at 14:57:15:

I have a home I sold on contract, and the owners are getting approved to buy me out. I spoke to their loan rep, and she said they are approved and the loan will get funded February 15th. I’ll get a check for approx $18,000 on that date.

Is there a way to exchange into these seven condos? I’ll be taxed for long-term capital gains on the $18K, but could avoid that if I exchange into the condo units, right?

If I exchange into the condo units, do I have to use ALL $18K? I’d like to put only $10K down to get the condos. Am I allowed to do this…keep $8K cash for other deals, and exchange 10K into the condos? Or do ALL the proceeds from the sale (18K) have to go into the exchange property? What are the rules?