What to do with Condo in FL?


I currently own a condo in FL that I’ve had for about a year. I’d like to hold onto it but don’t think I could get it to cash flow because of the HOA fees, taxes, etc. I am looking to buy a new home by March 07’ and am wondering the best way to go about selling the condo. I think I can get out of paying Capital gains because of a job transfer (not sure how that works exactly) and I don’t necessarily need the money from the condo sale to go toward a down payment on my new home. Does owner financing seem like a viable way to approach this situation? I currently fave a 30yr. fixed rate at 6.5percent, maybe I could charge the seller a higher interest rate? How about a Lease Option? How viable are these options considering I may not be living in the same area after I buy my new home? (Possible problems with eviction, etc.)

If Lease Option is a good idea, please share any ideas on how to set this up with the buyer. I currently owe 142k on the condo and should be able to sell for around 165k. Thanks for the advice!

Z in Clearwater

If you can stay in the condo for a total of two years (i.e. if you purchased in Mar 05), and you lived in the condo for the entire time, then there is NO tax on the first $250,000 of profit ($500,000 if you’re married). You can even lease it for up to three years after move out and still qualify for this exclusion.

A few things to consider:

If you sell “subject to,” the loan will still be in YOUR name, and be on YOUR credit report. While this won’t be a problem for your next home since you can show them the bill of sale or whatever, if your buyer stops paying, you could face double payments or negative credit. An excellent idea would be to leave your equity in the home, and sell on a wrap. Of course, by doing this, try to get a price slightly above market due to the attractive terms. You could easily get 8.5-9% in addition to an above-market price.

LO is pretty much the same as selling. Just show your new lender the lease.

You’ll just need to be careful about triggering the due on sale clause, since your rate will be below-market soon.

How exactly does a wraparound mortgage work? Is the name still under my name and my credit on the line if the buyer doesnt pay on time? Also, you mentioned the “due on sale” clause. What is the best way to set this contract up legally? I’d be happy to do a wraparound mortgage if it can be set up. The condo is priced at 165k right now. How much should I ask for if I do this type of deal?

Effectively with a wraparound mortgage you’re leaving the existing mortgage in place, and YOU are still effectively responsible for the note and its associated payments. Your buyer has a separate payment that is made to you (really this is usually handled by a bank or escrow company), and that payment splits off - to pay your note, and the remainder as a check to you.

So for purposes of this example, lets say your payments are $1000/mo at 6.5% interest, calculated on 142k. The terms to your buyer are negotiable in the contract (since he’ll see a 100% seller finance deal), so you get 7.5% on the full 165k. Effectively, you’re collecting interest on the bank’s money. HOWEVER, this means that you’re responsible for the loan, and you must do your own verification of the buyer’s creditworthiness.

There, I know how they work… I have NO IDEA how to set one up!

Best thing I can say is to find a good creative RE Lawyer.

Thanks for the help Joel. I’ll definitely look into the matter further.

Not that I am a big fan, but you can always refi your condo using a neg arm loan and it will definitely cashflow. many investors still use these loans to increase cashflow on properties they plan to hold for 3-5yrs because of early payoff penalties. But typically a 145K loan will have a payment of about $500 a month…

Now if you plan on renting or even L/O the condo, then I recommend setting up a LLC and protecting yourself. Then set up a landtrust with the person your doing the lease option with. You can place your LLC in the landtrust that holds the condo. The landtrust will prevent the Due of Sale clause from kicking in. You will have a trustee named to handle the trust for both parties till the condo is sold. This also gives you some tax advantages and total protection from lawsuits…

While that may be an option, the condo is already close to 100% financed. There wouldn’t be much amortization to give up. Interest only may be an option here, but I seriously doubt you should consider the negative am, Philz.

Well he has about 20K in equity and in the condo market in Fl its still good in the clearwater area, it will not drop, if anything have a little surge with the cheap prices in the tampa area and zephyerhills area because with all the conversions it will start to push prices up by his condo…

He can refi the property with about $6000 in closing cost on a neg am loan , possibly find someone allowing no prepay penalty after 3yrs as I know they are out there. Then look into renting for 1 or 2 yrs and then doing a L/O for the final yr. He will have some cashflow…I do not know the rental rate there so its hard to determine actually cashflow plus the HOA fees and taxes…But should have some cashflow…

or refi to I/O loan if you do not have one and get a solid 10% downpayment to cover the refi cost and put some cash in your pocket, and then charge about $200 a month over holding cost with a credit back at close…

I/O loan would put me at about 900/ month + HOA fees of 250 = 1150/ month. Rent goes for about 1200 in the area. Is it realistic to be able to charge 200 above this per month and get a 10% downpayment on top? How do I set this up. Do I need a LLC to avoid due on sale clause? (please explain) and how long should the L/O run and what is a good strike price? (Current market value is about 165k) Thanks for all the great advice!