I am helping my father sell his rental property and plan on using my company to close the deal. My father owes 71k and we have an approved buyer offering 140k. I know I need to have and Investor Disclosure Agreement and Purchase agreement signed. Im just not sure if I should have agent who is representing both parties draw up the documents for us or how this works. I dont have a an attorney and this is my first deal, any information will help.
Thank You
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Is the aproved buyer a retail buyer (who is approved for a mortgage), or are they a cash buyer? What is your exit stratagy with this? You could use transaction funding, or, see if the title co. can do a simultaneous close.
The buyer is actually the person renting the property. The title company handling the sell helped the renter/buyer get financed. After meeting with accountants, the capital gains tax is too much for my father and taxes will be so high he will lose majority of the profits to taxes anyway, so If I do an assignment and just pay off his existing loan he will be free and clear of the property without having to worry about additional taxes. I will be taking the profits for investments instead of him paying everything to uncle sam. But I need to know how to set up the sale so that everyone wins. The buyer will get the house they've been wanting, my father will no longer have to worry about the property, and I will utilize having a company to filter it through and receive profits. I want to use the instant equity exchange but I just need to make sure I have the proper documents in line before I introduce what we are trying to do to the title company.
Don't spend so much time planning for the future that you miss out on everything you planned for. Get out and get it! Concentrate, Elevate, Dominate and Innovate.
With the situation that you are describing, I would recommend that you speak with a RE attorney in your state. When you are trying to get into techniques that are a little more technical, you need to have an expert in that area advise you.
Best of luck to you both.
Karen
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Karen has a point when dealing with technicalities leveraging the talents of others is crucial and may end up saving you more then you think also if you (have to sell as an individual and the bank or title company would not let you sell as a company) google 1031 exchange then speak to a real estate attorney as well this way you avoid capital gains taxs as an individual .....
DIsclaimer I am not providing legal advice but advice as an individual to the extent of my knowledge I have attainted you should seek out legal matters from an attorney for clarification, execution and process of these steps
A 1031 exchange in the most basic of explanation is refering to the code of the Internal revenue service that allows an individual sell a like kind item (in this case real property or "real estate" ) within a given time frame (45 days I believe to identify the property or properties in consideration) and then close in a respective time frame after that to defer the capital gains that would incur
Example your father sells his house at $140, 00 he identifies two properties within that time frame that could be worth $140, 050
This will qualify for the deferment of paying capital gains taxs
Then (he can give u the properties for you, one you use for your home and another as a cash flowing property)
You avoid taxs fuel your business with cash just speak to the attorney also to find a way around estate tax (when a parent gives an inheritance to a child taxs are imposed as well)
Best of luck to you both.
Karen
Watch your thoughts, for they become words.
Watch your words, for they become actions.
Watch your actions, for they become habits.
Watch your habits, for they become character.
Watch your character, for it becomes your destiny.
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Our Heart's Desire must be nurtured by our mind,to give birth to common sense, that will enable us to seek out the path less traveled, with the greatest Personal Growth. -J.R.-
This is definitely a time to be very cautious and do it right. You need an attorney who practices specializing in real estate law in your state. This is not something where you can look in the phone book or your best friend's cousin happens to know an attorney. This will save you money and perhaps even a lot of heartburn in the end. If it were done wrong, it might cost a lot more to have an attorney unravel it and do it over again. As you wrote, you want it to be a win-win for everyone. It seems like an interesting deal. Let us know how things went.
Be your very best always-Judy Williamson
What you focus on is where your energy goes-Kristin
With gratitude,
Patrick
I appreciate the advise everyone. I thought this would be a fairly easy transaction considering the methods mentioned in Deans books. Glad I reached out because I would have walked into the title company without the proper leverage from what it sounds like. Seeing as this is my fathers property I figured it would be easier with less agreements considering all parties are open and honest about our intentions. Would this be any different if it wasn't a relative and I simply found a motivated buyer and a qualified seller and did an assignment? I'm just trying to better understand the methods mentioned in Deans book. Either way I will definitely take the advise and find a good attorney that specializes in real estate.
Don't spend so much time planning for the future that you miss out on everything you planned for. Get out and get it! Concentrate, Elevate, Dominate and Innovate.
Marc,
if it wasn't your father, then you would sign a purchase agreement to put the property under contract with the seller, and then do an assignment of contract between you and your buyer, where you would get your fee from the buyer and 'assign' your contract to him/her. However, because this is a rental property, the seller would be liable to pay taxes on the profits made from the sale, unless seller did a 1031 exchange (where he would use all the proceeds of the sale to purchase another rental property). As Karen said, it will be in your father's best interest to seek advice from a real estate attorney and an accountant to know what would be the best way to 'sell' his rental property and be able to defer paying taxes...
Valerie
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I as you know the theory and I have not put into practice as of yet....
With this being said (and all who have done a deal correct me if I am wrong) there are some points I would have covered
1) I would lock this deal up with the seller with exit clauses of 14 day inspection and pendant upon the buyer's inspection
2) I would before even looking for a deal will get my buyer's list healthy first and see what kind of ROI (return on investment //and contigent upon what kind of properties they look for) they are looking for in terms of rental property or to flip ....
3) I would run comps (comparables) to figure what to pay for ARV (After repair value) and work from this number
Amongst other steps
Watch your thoughts, for they become words.
Watch your words, for they become actions.
Watch your actions, for they become habits.
Watch your habits, for they become character.
Watch your character, for it becomes your destiny.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Our Heart's Desire must be nurtured by our mind,to give birth to common sense, that will enable us to seek out the path less traveled, with the greatest Personal Growth. -J.R.-