Low Down Payment by Edith Lank on Creators.com

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Using Stepped-Up Basis Dear Edith: My deceased mother's house has an offer that my siblings and I have accepted. We believe we each will receive about $20,000 after the realty fees. My question is, do I have to pay income tax on the money, since it is my inheritance? …Read more. How to be a Flipper Hi Edith. I'm intrigued by the idea of flipping a house — buying, fixing up and re-selling at a profit. But I have exactly zero experience and no cash. Not exactly a recipe for success. What's the best way to go about finding a flip-worthy …Read more. Holding a Mortgage Dear Edith: I have someone who has asked me to be their mortgagor, and I was wondering, how does one go about the paperwork? Are there standard forms to be used? How does one file the mortgage lien? Would a real estate attorney be advisable or …Read more. Some Estate Planning Dear Edith: Our parents are in their late 80s. Three years ago, they moved from their home to a rental apartment. I moved in to their house and have been renting it from them. My sister and I will inherit it when our parents pass away, but we are …Read more.

Low Down Payment

Ms. Lank: How can I purchase an investment property without putting 20 percent down? I currently own my home. — email

Answer: These days, lenders are being extra-careful, and they do require substantial down payments on non-owner-occupied properties. But I can think of several ways you could buy without meeting their standards:

— If you can, buy for all-cash.
— If you can, borrow on your present home.
— If you can, find a property owner who is willing to hold a private mortgage for most of your purchase price.

That last is not impossible. A real estate broker might help you locate, for example, an older investor who is tired of being a landlord. Sometimes it's to a seller's tax advantage to receive the purchase price over a period of years. If your credit looks OK and you make a good impression, a private mortgage sometimes suits everyone's needs.

HERE'S A NEW ONE

Dear Edith: Unfortunately, the real estate market is not getting any easier. Here's the video story of my client's last closing. Go to YouTube and look for "The FHA Fiasco." A few years ago, there would have been no problems with this buyer. — email

Answer: Many years ago, this column was the subject of a feature story in a national magazine because I was doing something revolutionary: inviting readers to contact me via something known as email. And now, another landmark: yours is the first story to come in via YouTube.

Several similar complaints came to me (but by email) just this week. Because banks got into so much trouble with careless lending practices in the past, they are now extra-careful to follow FHA requirements. And one new procedure is that last-minute re-checking of all the borrower's qualifications.

Why your buyer needed co-signers, I can't tell, of course. But if you got all the way to loan commitment in just 33 days, that's actually pretty good. As they kept assuring you, it was really a piece of cake!

DOING IT YOURSELF

Dear Edith: Many years ago, I rented a house to a family on a land contract, where they were buying the property month by month.

They have been faithful about it, and they will soon have it paid off. I have my original deed, and I would like to sign it over to them without a lawyer. Will this work? — email

Answer: Selling real estate is not like signing over the title to an automobile.

There is no piece of paper that is the title to a house. In real estate, the word "title" simply means "ownership." That old deed was a document by which someone transferred title to you. That's all it was good for, a one-time happening. You need to sign a new deed by which you'll turn over your ownership to that family. The document should be in proper order to be accepted for entering in your county's public records office, so don't try to do it yourself.

2012 FORGIVEN DEBT

Ms. Lank: If your mortgage is forgiven in 2012, is it taxable? — email

Answer: In the past, if you borrowed money and never paid it back, the IRS would say you'd had taxable income. But in consideration of today's difficult mortgage market, the IRS is continuing an exception through the end of 2012. If the mortgage was against your own main home, the forgiven debt will not be subject to income tax.

SELLING A TWO-FAMILY

Dear Edith: For many years, I have owned a duplex, and I live on one side, but I'm about ready to move to senior housing. I have an opportunity to sell the house, and I'm wondering about income taxes on my profit. — email

Answer: Half of your profit — the half that's attributable to your own apartment — will qualify for the home seller's tax exclusion. You can take a profit of up to $250,000 (twice that if you're married and filing jointly) with no capital gains tax due.

You will owe tax on the other half of your profit — the sale of the other apartment. Calculating your gain on rental property can be complicated, and you should use a tax professional.

But when you say you "have a chance to sell," I wonder how you're arriving at your sale price. Has the property been tested on the open market? That's the best way to determine its real market value. Or you may want to pay for a professional appraisal. Sometimes when a sale is too easy or too quick, you short-change yourself on the price.

Edith Lank will respond personally to any question sent to www.askedith.com.