Let the kids inherit it. Seriously...

My Class C houses would only be saleable via RTO or to other investors. I'm not a huge fan of RTO presently, nor do I want the low-ball pricing investors (including me) pay for these little ATMs. Their value is as a steady stream of high positive cash flow. So for now, I plan to keep them decent and some day let the kids take over...at which point they'll get the stepped up tax basis and they can sell them or keep them and manage them/hire a manager. This of course depends on my kids' ability and skill as wise managers. I won't give them the property if it won't be a blessing to them.

When I have a long term ownership of a single family home that is in good shape, paid off and in a great school district, I market the property to a family looking to:

A) rent

B) own

C) rent to own

D) send their kids to good quality public schools because private schools cost between $7,000 to $15,000 per child per school per year.

Imagine a family with 3 children. A year's cost to send them to private schools would run around $30,000. It would cost less to rent or own a home in a top public school district -- where I own 8 Single Family Homes.

If I sell a home to a family looking to escape the cost of private schooling, they will stay in the home a minimum of 10 years. So I'll carry back the mortgage and have a "Pre-Payment Penalty" if they pay off the loan before a 10 year period. Second because I'm not using a real estate agent, I'll save the 6% commission. Third because I offer a no-points mortgage with a no appraisal fee, I can get around 3-5% over the market price. Also I'll obtain a lenders insurance policy to protect me against tenant/owner damages if I have to foreclose.

On my first Owner/carry-back mortgage I got $10,000 over the market price (10%).

My houses are mostly low-end types and all my choices look bad.

1. List on MLS: FHA financing is miserable and very expensive. Broker commission plus having to pay the buyer's closing costs. Plus expense of getting them ready to sell.

2. Sell to other investors: relatively easy, but very low price.

3. Seller financing to owner occupant: Good price, but high risk of default and damage to house.

We tried to GIFT AWAY our biggest dog-couldn't find an agency or non-profit to take it last year.

Finally listed it on the MLS-got an out of town investor who bought it.

I think we lost 85% of what we had originally paid for the house, but it was WORTH IT!

We're done with that dog! Thank God for that!

I get an email from trulia every day (or more often) about what is for rent or sale in my markets, and it looks like things are really looking up, price-wise. We might try to sell off a few others that we don't want. (We have 20 SFH,I think)

We'd like to get rid of our lesser-producing houses and just concentrate on the ones we have in better areas.

Other than that, we have two sons who each will inherit half of what we have left.

Great question.

I have 32.

The tax consequences of selling pain me to think about. I like the idea of letting the kids inherit them at a stepped up basis bit that won't be for awhile so I have to continue being a landlord. And I hate to make dealing with my estate such a burden.

So I've thought about slowly downsizing. I wouldn't want to sell and force a good tenant to move and nobody seems to ever move.

I actually did sell one this year and owner financed it to the former tenant/now owner. But due to the potential risks I don't want to do that regularly.

A couple tenants have asked if I would sell to them and I've said yes, so long as you get your own financing.

I'm with Sid; IF my youngest son would want some of these.

There are investors in my area looking to buy. And, of course, like all investors, they want a "great" deal. What they would offer for some of these would likely be an insult.

I'd rather see if I could leave these to my son (my oldest son would have nothing to do with being a landlord).

>>>lenders insurance policy to protect me against tenant/owner damages<<<

Robert j, could you tell me a little more about this type of insurance? I would guess it is very expensive. Anybody else heard of this?

Since I really don't need the cash, seller financing is starting to look like the least bad option for me.

My thinking is, if they default, I will try to get them to move out peacefully. Give them all their DP money back, if I have to.

To put the odds in my favor, I would screen like heck to find a reasonably credit-worthy buyer.

Also, under Dodd-Frank or SAFE, you can't have a balloon payment, but you can raise the interest rate 2% per year after 5 years, with a maximum of 6% over where you started. This should be a strong incentive to get them to refi within 5 years.

Thoughts?

Randy,

Our plan is to leave one LLC (and its houses) to one son, the other LLC to another, and some IRA units to the last one.

Susan,

I am no expert on D-F and SAFE, but here are some things I have picked up. Under DFS, you can do up to 3 seller-financed sales in a year without using a licensed mortgage loan originator (MLO). However, each state has its own version of DFS. And I think I remember reading something that said in Ohio, if you have a lawyer handle the closing, you don't need an MLO. But I have not been able to confirm that.

IMO, the worst requirement in DFS for seller financing is the MLO rule. The other rules really don't seem that bad to me.

Most of mine are in places that are now zoned R2 or R3, or that a block away is, so I should be able to get the zoning changed. I already tore down 3 old dogs, I'm working on building a nice new multi, and have plans for a couple more.