Bankruptcy Or Foreclosure
I dont know the difference in the two. If my investment property goes into foreclosure will I still have to pay the loan on the home off after it is taken from me. And how long will foreclosure stay on my credit report. If I choose bankruptcy then I know it will save me from foreclosure but what happens with the investment property then. Would I pay a low amount until I was caught up. And how long will a bankruptcy stay on my credit report. And which one is worse in the long run as apposed to me closing on the house that I want to buy for myself. :-?
Here's a link to the company I have used for 1031 exchanges:
http://www.ipx1031.com/index.html
I have been happy with their services. There website also contains a lot of helpful information.
Good Luck!
Question: If my investment property goes into foreclosure will I still have to pay the loan on the home off after it is taken from me.
Answer: If your property is sold through a foreclosure proceeding normally you will not be responsible for the loan
Question: how long will foreclosure stay on my credit report.
Answer: Can remain on your credit record for 7 to 10 years.
This is not correct "If I choose bankruptcy then I know it will save me from foreclosure but what happens with the investment property then". Filing bankruptcy does not save you from foreclosure, it will only delay for a few months and run up legal fees.
Question: Would I pay a low amount until I was caught up
Answer: No, unless you are able to do a work out with your lender
Question: how long will a bankruptcy stay on my credit report.
Answer: Can remain on your credit record for 7 to 10 years
Question: And which one is worse in the long run as apposed to me closing on the house that I want to buy for myself
Answer: Foreclosure
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Thank You for your clarification. I appreciate it.
You are correct. The dates are the critical factor.
Best to talk directly with the 1031 company. I have heard one that can allow you to purchase before the sale occurs, but there are still time lines that must be adhered to.
It is possible to delay the purchase until the sale? Coudl you explain your circumstances to the seller, and do something creative..like a lease option for 6 months?
The seller is pretty flexible but I'm getting a great deal and hate to push him too far. My buyer is also pretty flexible so I think he will go for an owner finance (a little down and the balance in 6 months) rather than waiting 6+ months for the whole deal. He wants my property so I think he would like the deed in his name too.
I really don't know what a lease option is but I assume that I would lease the property from the seller with an option to buy it at a later date.
The dates are certainly critical in order to complete a successful 1031 exchange, but you also must make sure that you follow the other guidelines as well. For example, you must make sure that the total of the replacement properties values is equal to or greater than the sales value of the relinquished property, that you reinvest all of your next cash proceeds (you can not end up with any excess cash after it is all said and done unless you want to trigger some income tax issues) and you must replace the mortgage values. So. you need to make sure that you have replaced the correct values so that you qualify for a 100% tax deferred exchange.
You can do a reverse 1031 exchange where you are allowed to purchase your replacement properties first as well.
I would be happy to help you through the calculations if you like.
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Here are some more specifics on the deal. The relinquished property will sell for 183,000 with a gain of 90,000. I will receive 25,000-30,000 down and the balance will be paid in ~6 mths
The 3 replacement properties I have identified so far total 121,500. I'll pay 25,000-30,000 down and the remainder will be financed over 15 years at 5%.
I'm hunting for additional property to offset the remainder of the relinquished sale.
Please correct me if I am wrong but I don't replace the rest of the relinquished property procedes my capital gains taxable liability would be =(Total gain) * (% of total relenquished sale reinvested). Or 93,000 * 121.5/183
Another question: who is involved in a typical 1031 exchange? A spoke to a local lawyer who said he can work up all the documents and arrange for a qualified intermediary. Would he normally be the lawyer to do one or more of the closings or is he a separate party in the transaction. Right now it looks like we would be using other lawyers for the closings on both ends, is this normal or advisable?
Also in 6 months when I receive the remainder of the procedes do I have to pay off the other properties of have I short curcuited the cash out refi process.
Here are a couple additional comments based on the details that you have provided.
The relinquished property sells for $183 and you will acquire total replacement property of $121.5 so far. If this is where the transaction would end, then you would have boot in the amount of $61.5 ($183 less $121.5). The boot would then be compared to your capital gain, which is $90 in this case. $61.5 out of the $90 (approximately) would be taxable based on this scenario. I have ignored routine closing costs, etc.
Next, the seller carry back will create some challenges for you. It is easy to include them as part of the 1031 exchange, but difficult to figure out what to do with them once they are part of the exchange. The "1031 exchange proceeds" need to be used to acquire the replacement properties, so if the proceeds include a note the note would have to be converted to cash unless the seller of the replacement property is willing to accept the notes as part of the consideration (which is veyr unlikely). You can sell the notes to a third party, or you can contribute cash if you are liquid enough on your own behalf.
The parties involved in the 1031 exchange transaction would be the closing agent, which would be the closing or settlement attorney in most states and the Accommodator/Qualified Intermediary would be involved with both the relinquished properties and the replacement properties. The closing attorneys would handle the routine closing portions and the QI handles just the 1031 exchange transaction. We would be happy to act as your Accommdator/Qualified Intermediary and work with both attorneys on both sides to structure your 1031 exchange transaction.
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....Next, the seller carry back will create some challenges for you. It is easy to include them as part of the 1031 exchange, but difficult to figure out what to do with them once they are part of the exchange. The "1031 exchange proceeds" need to be used to acquire the replacement properties, so if the proceeds include a note the note would have to be converted to cash unless the seller of the replacement property is willing to accept the notes as part of the consideration (which is veyr unlikely). You can sell the notes to a third party, or you can contribute cash if you are liquid enough on your own behalf....
I believe I can manage to contribute the cash to make it work. The downpayment of my reliquished property should cover the downpayment for the acquired property and I can handle the payments on the acquired property. Hopefully, the tenants will actually cover them.
wexeter, I checked out your website and the per acquired property fee makes your services a bit painful. I've had a local attorney give me a quick verbal quote which did not include any per acquirred property fee and he is familiar with the transaction. It looks like I'll end up with 4/5 acquired properties to offset the entire sale.