Archive for May, 2008
Real Estate Dealers Sell Owner Financed Notes to Pay Taxes - The Partial to the Rescue!
May 31st, 2008 categories: Seller Financing, Selling Your Note
The subprime meltdown forced many dealers/rehabbers to sell their properties using some form of owner financing. People just couldn’t get the bank financing, so to move the properties, they provided the financing for the buyers. Now, they’re sitting in front of their CPA and gasping! The IRS considers the note they took back in profit is the same as cash, and Uncle Sam wants his share!
What can note holders do to cover an oppressive tax liability?
They can sell a portion of their note, a partial. Let’s say the dealer owes $30,000 in taxes, and one of his notes is $100,000 at 9% over 360 months giving him a monthly payment of $804.62.
He doesn’t need to sell the whole note, he just needs $30,000. So what if he sells the next 5 years of payments? What would that look like?
The note buyer pays $30,000 for the right to receive $804.62 a month for the next 5 years. $804.62 x 60 = $48,277.20. This represents a 20.59% yield.
The note seller gets $30,000 now to cover his tax liability, and he gets the note back in 5 years. When he starts receiving the payments again, the note will still have a principal balance of $95,880.34! He gets his money now, his principal balance is only $4,119.66 less than when he sold it, and he still has 25 years of payments to collect! $804.62 x 300 = $241,386.79 + $30,000 (from note buyer) = $271,386.79 total income from his $100,000 note!
- I want to carry paper, please help me create a valuable note.
- If I Carry Paper, How Much Will I Get Each Month?
- How Much Will You Pay for My Note?
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Related Reading:
- The Buyer is Asking Me to Carry - Would It Be a Good Note and Would You Buy It?
- Seller Financing Explodes As More Owners Become Willing to Carry Paper
- What You Don’t Know About Notes Can Cost You Listings, Sales and Closed Escrows!
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Sierra Madre Real Estate Market Report - March 2008
May 30th, 2008 categories: Real Estate News
The next several consecutive posts will be market data tables from our local real estate market. This table shows how Sierra Madre fared in comparison to the national real estate trend numbers that were released a couple of days ago showing a 14% reduction in home prices.
As you can see from the numbers, there were very few closed transactions in Sierra Madre . . . a whopping 6 for the entire month of March. This is almost half the number that sold during the same time last year, and it took about 30% longer to sell (86 days on market compared with 63).
But just like many surrounding areas, prices were up on all accounts, from low “sold” price to the median home price. The message? If you’re willing to price reasonably, you will likely be in escrow in less than 90 days, and you’re still going to sell for more than you could have last year. At least, so far.
This is NOT what most real estate markets are experiencing, so let’s count our lucky stars! And we’re even luckier that NO Sierra Madre homes were lost in the recent foothill fire . . . that was scary. A friend of ours had the flames stop only 3 feet from their backyard fence! Yikes!
I’ve got a cabin up Santa Anita Canyon past Chantry Flats on the way to Sturtevant Falls, and we were holding our breath hoping the flames wouldn’t go over the top, and they didn’t. But wow, talk about stressful!
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How Does Pasadena Compare to National Real Estate Trends? Market Report March 2008 - 91107
May 29th, 2008 categories: Real Estate News
National housing is down 14% . . . how does Pasadena fare? Here’s the data for zip code 91107:
Wow! There were 63% fewer closed real estate transactions in March of 2008, than March of 2007! Holy cow! That’s quite a lot, isn’t it?
But the interesting thing to note is that prices were UP, not DOWN!!!
Average home sales were up 9%, and the median home price was up 5%. OK, so you had to wait a little longer (63 average DOM), but prices are still going UP instead of DOWN. Just fewer people are risking it, I guess.
Priced well, homes are getting multiple offers and selling within a couple of months. Not bad. The government is currently offering some great incentives, so if you’re thinking of buying, don’t wait!
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