If there was a duplex for sale worth $100K and I persuaded the buyer to sell for $50K so they can cut down on the capital gains tax, is that illegal? Here is the breakdown of the deal: I would get a $70K loan from the bank because they would look at the LTV, so I shouldn’t have any problems. Give the owner $50K and finance $50K from him a total of $100K. I would then keep $20K…does this happen daily or am I just dreaming? Hope I didn’t confuse anyone
Question #1: Have you already found a bank who will give you MORE that what you’re paying for the property?
Question#2: You’re borrowing $70k for a loan, giving the owner $50k and keeping $20k. How long do you plan to keeep the property?
The problem(s) with your scenario is that most banks loan on the sales price or appraised value, whichever is LOWER. Some hard money lenders will loan on LTV, but it’s only because they’re charging super-high interest rates and points on a short term flip.
If you’re planning on keeping the property long-term, then you need a regular loan, which means you can only borrow based $50k offer price.
I’ve never met a property owner willing to sell at $50k below market value simply to avoid capital gains tax.
It looks like the owner WILL get his 100k, he will just have to finance 1/2 of it.
James
Good for you ! You are dreaming. What you have is a purchase at 100k and the seller will carry back a note for 50k and still pay taxes on the income over time. You will only be able to get a loan for 50k from the bank…which means 100% financing which could happen depending on your credit and other financials. Good luck with that, Your ernest money agreement would show 100k purchase price and that is where the financing is based. If you were to write it at a higher # and request the seller give credit for closing costs ,that may be acceptible in your state.Hope this helps :biggrin
Well i have a question about buying a duplex under a land contract. i want to know if i’m able to have the seller convey the property into a trust so that if they acquire any debts, his creditors will not be able to apply any liens to the property. does anybody know if this works?