State Specific Question About: MARYLAND (MD)

You will want to have a higher interest rate and greater downpayment than a typical bank note because you're probably going to attract someone with bad credit and you'll take a higher risk. Ultimately, you may get a trashed house back after a lengthy foreclosure, costing more than the original taxes.

Have you considered a property manager if you don't want to deal with it anymore?

You could talk to an accountant to see if you could transfer it into a ROTH IRA and defer taxes. However, if Obama has his way, or if Elizabeth Warren becomes president, they'll probably kill the ROTH and tax the earnings in it severely.

Depends where you are located in Maryland.

If you home is in Annapolis, the job market is pretty good. Chances our your buyer would do well.

If you are in one of many other rural areas, your buyer may have a tough time keeping a solid job and making the payments.

I've bought a bunch of homes with owner financing here in the greatest state of Maryland. My credit was always stellar but I was self employed.

Seventy years old is not that old, perhaps you may entertain the idea of taking on an apprentice. Have someone show you that they will take care of the rental and in a few years sell it to them once you believe they know the rental business.

You may want to get a residential mortgage loan originator (RMLO) to vet your owner buyer to keep you in compliance with the SAFE Act and Dodd-Frank.

Detra,

I'm not a CPA so seek educated advice.

My free advice from 38 years of buying and selling is the moment you "sell" the house (close, sign over the deed) you have created a taxable event weather you collected any money or not. Please double check my advise with a CPA who specializes in real estate.

You'll have to pay taxes before your buyer has made but a few payments to you.

Land Contract or Contract for Deed varies by state but many states give the buyer huge advantages, leaving the seller unprotected. Ask me how I know!!

Overall, I advise to NEVER sell by giving up the deed. NEVER.

I have coached too many investors who lost big money when the buyer fell behind or destroyed the property. And I mean DESTROYED as in removed a valuable barn or burned down the house.

Just sell it and have fun with your money! Life is short!

If the tax on the gain is huge, consider a 1031 Exchange where you sell and roll it over to other income real estate. If you want something easier to manage consider farm land.

You would be very smart to sell a property and carry back the first mortgage. There are some new laws that require you not advertise you willingness to carry a mortgage -- only your real estate broker can offer to a buyer that you will carry back a mortgage or if a buyer writes that themselves in their offer.

By taking less than 29% down, you have made this an "installment sale". Meaning you don't pay all of the taxes up front. You pay the taxes as you receive income. Since a mortgage is mostly interest in the beginning, you will be paying mostly taxes on the interest received.

Also lets look at this from a different point. If you would to see a property with a real estate agent, the closing cost with commissions would total around 8 percent. Then if you receive all of you money up front from a cash sale, your taxes would be around 35%. 35% + 8% = 43% in taxes. You would only have about 57% of the money left over to invest after all fees, commissions and taxes are paid. The going rate for a long term CD is 2%. SO 2% on 57% OF YOUR MONE IS NOTHING.

What are your goals? At age 70, do you have children or even grandchildren who could buy you out of the house over time while renting it out?

To me, family is everything and I would try to work something out with them that saves you on taxes while also keeping an income-producing asset in the family.

Not everyone feels this way. And not everyone has financially savvy/responsible offspring. But if you do, my advice would be to work something out.

My wife and I take care of my in-laws and their properties, in addition to our own. We write the checks for their vacations, to replace appliances, etc. And we take care of them beyond that. We make their lives easier. In return, they will never have to think about selling income-producing assets, but instead live off the income. When they pass away, it flows to us with a stepped up basis (avoiding a lot of taxes).

^^ The above having been said, I guess you could do seller finance if you could get a large down payment and have someone with good credit... but it seems to me like such a person would just want a traditional mortgage, with rates being so low these days. A person with, say, 750 FICO, 100k income, and $50k down payment isn't likely to consider your arrangement. It seems far more likely at least one of the elements will be missing--like a high income and cash for down payment, but a bunch of medical bills. Or a person with good credit score and income but who is on a debt treadmill and doesn't have much money to put down.

It's just my opinion that I wouldn't lie down with a dog because I don't want to get fleas. And foreclosures have a LOT more fleas than evictions. Until you've done one, you can't imagine. I had foreclosures that were cut and dry, very routine, that took me 2 months of weekly follow-up before I finally got the property back to the bank. In fact, even after the foreclosure, what happens is that the "owner" usually leases the property to someone else during the foreclosure. This means that you need to take even more time explaining this to the tenant and to the court. Then, assuming you can proceed with the foreclosure, you still have to go to court and evict the tenant after the foreclosure. And lastly, you have to get the sheriff to actually show up on eviction day because the tenants in situations like these are often the worst of the worst. They won't go until the last second.

I don't have any grandchildren but I do have a responsible son. Should I just put his name on the deed?

If you put his name on the deed now, he inherits the price you paid - and will have to pay the same taxes you would when he sells.

If he actually inherits the property when you die, his basis is stepped-up to the day he inherits. Much better for him.

My grandfather made the mistake of deeding property on Cape Cod to my father while he was still alive. He had paid $700 for 7 house lots back in the day. My father had to pay astronomical taxes on the property when he sold it.