 Owner Finance & Inflation (by Bill [GA]) Oct 23, 2020 4:00 PM
 Owner Finance & Inflation (by Ray-N-Pa [PA]) Oct 23, 2020 4:47 PM
Owner Finance & Inflation (by Pmh [TX]) Oct 23, 2020 5:00 PM
Owner Finance & Inflation (by Pmh [TX]) Oct 23, 2020 5:03 PM
Owner Finance & Inflation (by S i d [MO]) Oct 23, 2020 5:06 PM
Owner Finance & Inflation (by James [NC]) Oct 23, 2020 5:06 PM
Owner Finance & Inflation (by Ray-N-Pa [PA]) Oct 23, 2020 5:10 PM
Owner Finance & Inflation (by S i d [MO]) Oct 23, 2020 5:13 PM
Owner Finance & Inflation (by Pmh [TX]) Oct 23, 2020 5:37 PM
Owner Finance & Inflation (by Jim in O C [CA]) Oct 23, 2020 5:58 PM
Owner Finance & Inflation (by Pmh [TX]) Oct 23, 2020 6:11 PM
Owner Finance & Inflation (by Landlord ofthe Flies [TX]) Oct 23, 2020 7:16 PM
Owner Finance & Inflation (by Ray-N-Pa [PA]) Oct 23, 2020 7:18 PM
Owner Finance & Inflation (by Robert J [CA]) Oct 23, 2020 8:21 PM
Owner Finance & Inflation (by Oregon Woodsmoke [ID]) Oct 24, 2020 9:57 AM
Owner Finance & Inflation (by DJ [VA]) Oct 24, 2020 10:04 AM
Owner Finance & Inflation (by Ray-N-Pa [PA]) Oct 24, 2020 1:36 PM
Owner Finance & Inflation (by Hammer [TN]) Oct 25, 2020 8:31 PM
Owner Finance & Inflation (by Pmh [TX]) Oct 26, 2020 5:42 PM
Owner Finance & Inflation (by Bill [GA]) Posted on: Oct 23, 2020 4:00 PM
Message:
Next year I plan to sell a paid off duplex to my daughter and do owner financing. I'm doing the owner financing in part to spread the Capital Gains.
But I'm concerned that in a few years as rents go up, I'll be kicking myself for agreeing to a monthly payment that stays the same for the life of the loan.
Can I structure the loan to keep up with rising rents? If so, how?
--71.88.x.xxx |
Owner Finance & Inflation (by Ray-N-Pa [PA]) Posted on: Oct 23, 2020 4:47 PM
Message:
I am not sure what your objectives are here?
If rents go up and your daughter is the owner....isn't that a good thing?
I love my family - but I know enough not to do business with my family.
Another path you could take is optioning the place to her giving her a healthy rental credit - have her manage it for you....and then 1031ing the capital gains after she gets her own financing --24.101.xxx.xx |
Owner Finance & Inflation (by Pmh [TX]) Posted on: Oct 23, 2020 5:00 PM
Message:
why would rising rents be your concern. you are selling at a set price & interest rate (?) is her property. be happy she can raise rates & easier for her to pay the “mortgage” my lenders don’t have escalations bc I raise the rents. --107.77.xxx.xxx |
Owner Finance & Inflation (by Pmh [TX]) Posted on: Oct 23, 2020 5:03 PM
Message:
to follow up: Ray is incorrect. cannot do 1031 with a related party. your daughter is a related party (!) --107.77.xxx.xxx |
Owner Finance & Inflation (by S i d [MO]) Posted on: Oct 23, 2020 5:06 PM
Message:
I'm not going to tell you yes or no about owner financing to your daughter since that isn't the quesiton you asked.
Very simply, you set this up like a commercial loan / ARM. Lock the interest rate at the time you sell, the have it fluctuate a Prime + X% ever Y years.
Your typical 3/1 or 5/1 ARM is fixed for 3 or 5years, then adjusts every 1 year. Or you can do a 5/3 ARM that is fixed for 5 years, then adjusts every 3 years.
The first number is the initial fixed term (i.e. 3 or 5) and the second number is how often it adjusts after (1 or 3).
I've seen 10/5 ARMS....fixed for 10, then they adjust once every 5 years. Never had any personally, but that is about as close to 30 year fixed rate that you can get in commercial unless you get into institutional money in the millions of $$$.
You can be as creative as you want as long as you spell it out and everyone agrees on the terms. Be sure to have a title company or attorney handle to paperwork. "Daughter and I had a handshake agreement on this" is a sure way to get into trouble down the road. --107.216.xxx.xxx |
Owner Finance & Inflation (by James [NC]) Posted on: Oct 23, 2020 5:06 PM
Message:
Bill, it goes both ways. What happens if the economy collapses and rents plummet in a few years? Should her payments go down? Typically the way I have seen mortgages fluctuate is when they are variable interest rates (e.g., ARMs), but it doesnt sound to me that you want to charge her a higher interest rate if rents increase, but rather, you want her to pay more to principal, so that the term is shorter. Do I have that right? If that is the case, you could have it amortize over whatever time period you agreed to, but include a balloon payment at some earlier time period. For instance, payments based on 30 years, but at 5 years she must pay it off (either on her own or by refinancing to another lender). --208.104.xxx.xxx |
Owner Finance & Inflation (by Ray-N-Pa [PA]) Posted on: Oct 23, 2020 5:10 PM
Message:
PMH you are correct........
however what if it was into a trust or LLC.
It would rather difficult to dig up that this wasn't an arms length transition especially if the asset was priced correctly. If it was given away, the IRS is going to chase you down for inside dealing anyway
--24.101.xxx.xx |
Owner Finance & Inflation (by S i d [MO]) Posted on: Oct 23, 2020 5:13 PM
Message:
Btw, one last caution: if we get HYPER inflation an adjustable rate loan won't help. Inflation will happen so fast your loan term won't react quickly enough. I've seen a lot of investors stringing out loans on 30-40 year terms anticipating that inflation will head into double (or triple) digits, effectively making it easy to pay off mortgages with boatloads of Govt funny money.
Something to keep in mind. I don't know how you deal with that in a contract since we've not had inflation that bad since the South inflated its currency to near worthless levels in the Civil War. That said, we haven't had spending this crazy since...ever... so I would not categorically rule it out. --107.216.xxx.xxx |
Owner Finance & Inflation (by Pmh [TX]) Posted on: Oct 23, 2020 5:37 PM
Message:
Sid suggests a work around with adjustable interest rate that would tie in with increasing rents. that could work. but then I will suggest to her she re-fi and buy you out. rates will be low for years....Sid: we will not see hyper inflation. we are not the Weimar Republic or Venezuela. To Ray: interesting idea to put up barriers. but trusts & llcs have owner/member controlling interests. I will defer to those more knowledgeable than me. I can say to OP I will be selling my rentals to my kids. So this thread is interesting. --107.77.xxx.xxx |
Owner Finance & Inflation (by Jim in O C [CA]) Posted on: Oct 23, 2020 5:58 PM
Message:
Well “Bill” Scrooge why don’t you suggest that your daughter increase her principal payments and pay you off sooner. The best part about landlording is when your rent go up and your mortgage payments stays the same Not including property taxes.
On my second rental I started out with rent of $410 and today the rent is $2575. I’ve been paid off for 20 years.
PS: Forget coming to California to see Disneyland because that won’t happen for another year. --99.23.xxx.x |
Owner Finance & Inflation (by Pmh [TX]) Posted on: Oct 23, 2020 6:11 PM
Message:
we want any more Kalifornians moving here to TX escaping the taxes & social programs & lawlessness they voted for or allowed to be voted in...nothing personal but we need a wall on western border --72.180.xx.xxx |
Owner Finance & Inflation (by Landlord ofthe Flies [TX]) Posted on: Oct 23, 2020 7:16 PM
Message:
A big beautiful wall. Or maybe TX should impose a new arrival tax for 10 years for all newcomers and suspended voter rights for 10 years until they learn how the economy really works.
Sounds like you don't want to let go. Why not just make your daughter a partner in your business and pay her to take care of the houses? --108.69.xxx.xxx |
Owner Finance & Inflation (by Ray-N-Pa [PA]) Posted on: Oct 23, 2020 7:18 PM
Message:
PMH, Beneficial interest in a trust is considered personal property. If instead of selling the property you are only selling the BI so you can even sell with getting due on sale clause triggered --24.101.xxx.xx |
Owner Finance & Inflation (by Robert J [CA]) Posted on: Oct 23, 2020 8:21 PM
Message:
Selling a paid off property and carry back the First Mortgage is a great tax saving idea, so long as the down payment is under 29%. Then it's an installment sale and you your long term capital gains tax as you receive payments.
You must have a Pre-Payment Penalty of 6 months un-earned interest if the pay off the loan before 10 years. Also have you on the insurance policy as the mortgage provider. Also get an assignment of rents. So if your daughter stops paying you the mortgage, you can collect rents to cover your loan.
If rents go up, you're out of luck... But you will me making interest and getting tax deferment. --47.155.xx.xxx |
Owner Finance & Inflation (by Oregon Woodsmoke [ID]) Posted on: Oct 24, 2020 9:57 AM
Message:
Rents have gone up, sometimes pretty substantially, on every property I've ever sold. Once I sell them, they aren't mine any more. If I wanted that increase in rent money for myself, I wouldn't have sold them. --76.178.xx.xx |
Owner Finance & Inflation (by DJ [VA]) Posted on: Oct 24, 2020 10:04 AM
Message:
Which is more important to you?
Your daughter and your relationship with her
or
A few dollars --70.160.xxx.xxx |
Owner Finance & Inflation (by Ray-N-Pa [PA]) Posted on: Oct 24, 2020 1:36 PM
Message:
I was thinking the same thing DJ. --24.101.xxx.xx |
Owner Finance & Inflation (by Hammer [TN]) Posted on: Oct 25, 2020 8:31 PM
Message:
Another option would be to sell with a fixed rate for X years with a balloon payment. You could always "refi" the loan at that time with new terms.
Ex. A fixed interest loan with a 5 year balloon. At the end of year 5, she can Refi you out. Sell the building and pay you off, or ask you to Refi the loan at a new rate. That gives you some flexibility if rents and interest rates go way up. --152.97.xxx.xx |
Owner Finance & Inflation (by Pmh [TX]) Posted on: Oct 26, 2020 5:42 PM
Message:
a Gordian Knot. I suppose Hammer’s solution to how to harvest future rents is a solution. but when I pull the trigger I sell & don’t look back. not sure why you so wanting to rip of your daughter. try to sell to anyone else first I suppose with those terms you want...good luck.. Life is to short. sell & go spend your $. that is what I do. --107.77.xxx.xxx |
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