Money Back At Closing
I am new to this website and have been dealing w/ real estate for a short time and have recently come across a friend of a friend who is connected to some investors that are trying to avoid capital gains taxes. I was asked to find them properties that fit the following profile... fmv =$180,000, repairs =$30,000 to $50,000. At that point, after appraisal to prove these numbers, they then purchase for full market value with the contingency that at closing they will get the repair monies back as cash back...they are offering about $1000 per every $10,000 cash back as a finders fee. Is this legetimate or should I steer clear?
Steer clear unless you want to be involved in mortgage fraud.
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These guys are not getting mortgages for these houses...they have made this money through legit business. All parties involved do know of the cash back clause...i just never heard of this before and didnt find much info about it on the internet or through investors i know locally, so I turned here. Thanks for the help and please keep it comin.
It seems to me that everytime someone runs across something new or creative everyone on this site is too quick to yell "RUN" and "SCAM" instead of taking a minute and trying to figure out how it could be done legally. I thought this site was called "The Creative Investor," not the "Scare People Into Doing Nothing Site."
boyd4444,
You are probably right thats why I am North Carolina doing what I can to present the creative investors side of the story, with what could be considered problem legislation for most creative investors who are ethical in their dealings, but could have their current rights taken away of how they do business because of the unethical investors..
This is currently happening, becuase someone thought of creative ways to do investing that the State Attorney Generals office calls fraud.
So when you are called up to present your side of this innovative concept in front of an Attorney General lets hope someone steps up to help you, because from what I have read thus far in this thread, except for what Nancy said, I would have to pass with my help.
John $Cash$ Locke
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boyd4444,
As long as your attorney is a criminal attorney, just make sure he is a good one.
John $Cash$ Locke
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boyd4444,
You need to explain this comment to me and when I say explain it to me I mean explain it.
"Nancy,
Yes, my attorney is a real estate attorney, but I thought that someone of average intelligence would have figured that out."
John $Cash$ Locke
TCI Moderator
With people either not knowing or not caring if these type of deals are OK to do or not…no wonder the Attorney Generals of Texas, North Carolina and Maryland among others are upset and their state legislature have new laws pending.
John (LV)
Hey ladies and gentleman,
The scenario of paying all cash for a property with the seller giving back to the buyer a large portion of the proceeds Is tax evasion and money laundering. Plain and simple
There is enough money to be made in real estate investing not to have to cheat.
On any cash transaction with more than 10000 "cash" used it must be reported to the feds. I imagine it would be a Home Land Security issue as well.
In the original scenario the amount given back was 30000.
Money laundering is money laundering..
The play these "investors" are making involves getting a piece of paper that says they bought the property for $180K, when they really paid, for example, $130K because they got $50k back. They will then claim 180 as their basis.
.
Presumably, they will hold the property for a year then sell it for a loss (a passive loss) and use the loss to offset passive gain they have from other legit (one hopes) investments.
This is essentially tax fraud--they are lying about the true purchase price of the property in order to create an apparent paper loss to reduce other tax liability.
Are the investors criminally liable? Yep.
More important: Is Disgruntled Dude liable? Maybe, for aiding and abetting the fraud. An important question will be the extent of his knowledge of what was going on (and whether his suspicion that something fishy is gong on amounts to "knowledge"