Terry D EA Posted January 20, 2017 Report Share Posted January 20, 2017 Rental client is a partnership with 13 rental properties. During 2016, their bank consolidated several properties into one loan and the insurance company lumped all of the properties into one policy. I can see dividing the insurance bill and allocating the amount to each property. Would there be any problem with doing the same with the mortgage interest but only dividing equally between the properties that were consolidated? Quote Link to comment Share on other sites More sharing options...
Max W Posted January 20, 2017 Report Share Posted January 20, 2017 Why not prorate according to what the previous payments were? 1 Quote Link to comment Share on other sites More sharing options...
Abby Normal Posted January 20, 2017 Report Share Posted January 20, 2017 Agree with Max, you should prorate based on the balances of the loans before the consolidation. 2 Quote Link to comment Share on other sites More sharing options...
Roberts Posted January 20, 2017 Report Share Posted January 20, 2017 I'd do a spreadsheet based upon previous loans - plug in the total and it spits out interest and taxes for each. That way you can also show how you came up with the numbers (not that it is going to really matter). If there are changes later, you can show how you adapted. 2 Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted January 20, 2017 Report Share Posted January 20, 2017 He will regret his choices if he decides to sell one of the properties. 4 Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted January 20, 2017 Author Report Share Posted January 20, 2017 1 hour ago, Jack from Ohio said: He will regret his choices if he decides to sell one of the properties. This is exactly what I have been concerned about. Allocating to the properties based on the previous loan values may be the only option that I have. Loan balance will not come into play when determining gain or loss on the sale of one of the properties but... under the consolidation, I am wondering how the bank will determine what is still owed on one of the properties that are part of the group lumped together. Hmmmm. Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted January 20, 2017 Report Share Posted January 20, 2017 1 minute ago, Terry D said: This is exactly what I have been concerned about. Allocating to the properties based on the previous loan values may be the only option that I have. Loan balance will not come into play when determining gain or loss on the sale of one of the properties but... under the consolidation, I am wondering how the bank will determine what is still owed on one of the properties that are part of the group lumped together. Hmmmm. If he chooses to sell on of the consolidated properties, the red tape, hoops and backflips he will have to do will be massive to accomplish it. It will all be with the bank. Whomever gave him that advice should be slapped... 1 Quote Link to comment Share on other sites More sharing options...
Catherine Posted January 21, 2017 Report Share Posted January 21, 2017 3 hours ago, Jack from Ohio said: Whomever gave him that advice should be slapped... We could say this about SO many situations our clients get into! (Never *our* advice, of course -- but then, it often seems that ours is the least likely to be followed!) 1 Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted January 21, 2017 Author Report Share Posted January 21, 2017 2 hours ago, Catherine said: We could say this about SO many situations our clients get into! (Never *our* advice, of course -- but then, it often seems that ours is the least likely to be followed!) Exactly, this is one of those situations where the client did not contact me nor ask me anything about this. I learned of this when reviewing the books and allocating expenses to each property. I am now waiting for the information to attempt to allocate the interest to each property for tax purposes only. I will also inform the client there will be additional charges for having to create mortgage amortization schedules for (7) properties. 2 Quote Link to comment Share on other sites More sharing options...
michaelmars Posted January 21, 2017 Report Share Posted January 21, 2017 I think you are overthinking this. I have a client that has done this for years. Even though its one mortgage, the closing papers will have a breakdown per building, especially if there were prior mortgage payoffs involved. Cash out based on appraised values over the mortgage amounts. In NY we also have a mortgage recording tax which would show the allocations. Insurance company will have a break down as to how they priced out the global policy. Usually a "per apt" cost. AS for selling one of the buildings. If his lawyer was worth his fee, he will have a right to substitute property or there would be a clause allowing prepayments of the mortgage without penalty. [maybe not for the first 2 years though] Clients do this because cross collateralizing gets them a very low rate, even here in NY its under 3% for rental properties. And having one mortgage also cuts down on closing costs. Biggest one that one of our clients did was about 30 properties in a master mortgage which was somewhere around $200,000,000. 2 Quote Link to comment Share on other sites More sharing options...
jklcpa Posted January 21, 2017 Report Share Posted January 21, 2017 Agree with what michaelmars said above. 15 hours ago, Terry D said: having to create mortgage amortization schedules for (7) properties As for 7 amortization schedules, take the advice Roberts gave and use one spreadsheet with allocation formulas. 1 Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted January 21, 2017 Author Report Share Posted January 21, 2017 On 1/20/2017 at 2:31 PM, Roberts said: I'd do a spreadsheet based upon previous loans - plug in the total and it spits out interest and taxes for each. That way you can also show how you came up with the numbers (not that it is going to really matter). If there are changes later, you can show how you adapted. Roberts would you be willing to share this spreadsheet? I do use excel quite a bit but do not have the experience to create this. Sounds like a better way to solve my problem. 1 Quote Link to comment Share on other sites More sharing options...
michaelmars Posted January 22, 2017 Report Share Posted January 22, 2017 there are many inexpensive loan calculation apps and programs. No need to recreate spread sheets. I like TValue. I think tax tools has some too as does quicken and maybe quickbooks. Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted January 22, 2017 Author Report Share Posted January 22, 2017 On 1/21/2017 at 2:17 PM, michaelmars said: I think you are overthinking this. I have a client that has done this for years. Even though its one mortgage, the closing papers will have a breakdown per building, especially if there were prior mortgage payoffs involved. Cash out based on appraised values over the mortgage amounts. In NY we also have a mortgage recording tax which would show the allocations. Insurance company will have a break down as to how they priced out the global policy. Usually a "per apt" cost. AS for selling one of the buildings. If his lawyer was worth his fee, he will have a right to substitute property or there would be a clause allowing prepayments of the mortgage without penalty. [maybe not for the first 2 years though] Clients do this because cross collateralizing gets them a very low rate, even here in NY its under 3% for rental properties. And having one mortgage also cuts down on closing costs. Biggest one that one of our clients did was about 30 properties in a master mortgage which was somewhere around $200,000,000. Thanks and I am trying to get this information from the client(s). This is a partnership where both are involved and I am not sure which one keeps track of the paperwork. I have asked for the closing documents and such that you have mentioned. Up this minute, I have not received anything other than the bank is working on it. I have enough to do already and putting this on the back burner this early is something I don't want to have to do. Quote Link to comment Share on other sites More sharing options...
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