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Tax Lease Question

This topic contains 13 replies, has 0 voices, and was last updated by Avatar of john_thoma john_thoma 14 years, 11 months ago.

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  • #154
    Avatar of john_thoma
    john_thoma
    Member

    Bill or Anyone,

    If you set-up a Nehtrust for the purpose of doing a tax lease how are major maintenance issues handled?

    For example, if the RB is getting property tax and mortgage deduction, but no future equity, and the roof blows off or the furnance goes, how does that repair money get accounted for?

    #7672
    Avatar of bill_gatten
    bill_gatten
    Participant

    Remember, a Tax Lease is really just an Equity Share with different perecentages, but still with all the responsibilities contractually falling on the tenant.

    #7673
    Avatar of john_thoma
    john_thoma
    Member

    Bill,

    Could you also offer to give the RB a credit against future equity from appreciation and principle reduction?

    #7674
    Avatar of bill_gatten
    bill_gatten
    Participant

    Yes, that’s what the Contingency Fund is for…exactly that.

    Remember that with the Eq. Hldg Trust Transfer, you can do anything you want.

    #7675
    Avatar of john_thoma
    john_thoma
    Member

    Bill,

    It’s my lucky night realtime posting and responses :)

    I didn’t mean to say give them equity. What I meant to say was show the RB making a contribution to the trust for the repair value.

    #7676
    Avatar of bill_gatten
    bill_gatten
    Participant

    Sure, as I said, just make sure everyone understands that a contribution to the Contingency Fund is not a down payment or buy-down of sale price.

    Bill

    #7677
    Avatar of sserio
    sserio
    Member

    Bill,

    Besides using the [blue]Contingency Fund[/blue] for a [red]major repair[/red], isn’t this what insurance would be used for, if necessary?

    Sal

    #7678
    Avatar of mcduffee
    mcduffee
    Member
    Quote:
    If the RB is getting property tax and mortgage deduction, but no future equity, and the roof blows off or the furnance goes, how does that repair money get accounted for?

    Quote:
    Besides using the [blue]Contingency Fund[/blue] for a [red]major repair[/red], isn’t this what insurance would be used for, if necessary?

    Maybe a combination of homeowner’s insurance and a warranty policy (“appliance insurance”) would cover these events.

    #7679
    Avatar of bigdaddy
    bigdaddy
    Member

    McDuffe,
    Good points… I do put a home warranty on my properties to cover things like a/c, plumbing, water heater etc.

    #7680
    Avatar of john_thoma
    john_thoma
    Member

    Mc Duffee,

    Here in NJ, we have the highest property taxes in the nation.

    #7681
    Avatar of sserio
    sserio
    Member

    Hey Guys,

    The way I think of a NEHT property that is structured as a Tax Lease is a property I probably am intending on holding onto, for the long term, while the tenant beneficiaries are paying the mortgage off … another words a property that I am keeping to help in reaching my wealth building goals.

    So the question on how to handle repairs, especially a major one, is very important.

    #7682
    Avatar of anonymous
    anonymous
    Member
    Quote:
    Yes, that’s what the Contingency Fund is for…exactly that.

    Remember that with the Eq. Hldg Trust Transfer, you can do anything you want. ?If you can conceive it, your can achieve it (made that one up my self…then sold it to Napoleon Hill).

    Just remember that any time you promise someone a reduction in price, a rent credit, or a piece of the equity in the property…you have just transferred an equitable interest. ?This transfer of equity is all they need for a claim of “Equity” to thwart any eviction attempt and force you into a judicial foreclosure mode and probably an ejectment action and a Quiet Title. ?Don?t even think about it!

    Bill Gatten

    Bill,

    I have a question in regards to ” or a piece of the equity in the property…you have just transferred an equitable interest. ” in the above quote.

    How or does this situation differ from “selling” all or a percentage of the existing equity, Potential appreciation or equity build-up when you are trying to increase your monthly cash flow thru “Income Layering”?

    Would appreciate it if you could clarify this for me.

    Thanks

    Rick

    #7683
    Avatar of bigdaddy
    bigdaddy
    Member

    I think Bill was referring to doing that using a regular lease option w/o the protection of the trust.

    #7684
    Avatar of bill_gatten
    bill_gatten
    Participant

    There are various ways to skin cats (assuming you’d need to have one skinned?gofferbid).

    Let’s say I’m starting with $20,000 equity in a property that I own, and you come in as my seller-carry buyer and give me a $10,000 down payment.

    #7685
    Avatar of jimmonty
    jimmonty
    Member

    Great discussion about risks and how to eliminate or reduce them.

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