Be creative and pro-active - Posted by John Behle
Posted by John Behle on November 13, 1998 at 15:35:17:
Good ideas from everyone.
What is your grandfather’s position as far as taxes and income needs? What taxes would he have to pay and does he want to?
What are his needs as far as income? Does he want the $29k or is the cash flow helpful? If he wants a greater cash flow, you can sell an amortized partial to cover his income needs. I know there is a balloon, but it sounds like they might be interested in extending it.
Option 1 - Buy the note yourself. Use cash from other sources. An IRA would be good for this, or use investor cash with an option to buy it yourself at a profit.
Option 2 - Get the payor to refinance. Offer a discount. If your Grandfather doesn’t need or want the cash, you buy the note, receive the cash and give your Grandfather a note (or notes) on other properties as your purchase price on the paper. You get a real cheap loan.
Option 3 - Sell the note. With that equity, it is real saleable. As I mentioned above, you could also sell a partial or an amortized partial. The best bet would be for you to do the amortized partial.
If taxes are a concern, you can do an “Installment Sandwich.” This can get your Grandfather the cash flow and tax savings he needs and get you the cash. If taxes are a problem, there is also a Charitable Trust technique that can avoid all capital gains, get a tax writeoff, provide income for your Grandfather and still send the benefits on to the heirs at death (via a life insurance policy paid by the trust). The trust could own, collect or extend the note, own and rent or sell the property, or sell the note to buy other properties, notes or ?.
Sounds like you have a foreclosure in embryo here. It’s not a problem - except for your Grandfather. Get the problem away from him and into the hands of someone (like yourself) that can turn it into a win/win opportunity.