Selling a B&B as a private home
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TheBeachHouse
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I don't have a lot of insight except that it has happened in my town many times. So it is not unusual.
Generic
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When we sold, we sold without the business, but it's different here. Could you possibly put the B&B in a company with a lease of the property paid to you two, whereupon there is a business running in the property, but it is NOT your business, it's a corporation?
Hillbilly
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What wrong with just selling the house and make sure everyone knows it does not include the business. The sale is for property only.
i think if you set it up as a Corporation it would still be counted as commercial. The property would be receiving funds for commercial lease. To me it doesn't sound like it would benefit in anyway to separate them and having you lease your property to yourself. I would think the only true way to figure it out is to have a meeting with a real-estate attorney. I'm sure there is ways around it. Several Inns in our town have sold and they are not commercial anymore.
i think if you set it up as a Corporation it would still be counted as commercial. The property would be receiving funds for commercial lease. To me it doesn't sound like it would benefit in anyway to separate them and having you lease your property to yourself. I would think the only true way to figure it out is to have a meeting with a real-estate attorney. I'm sure there is ways around it. Several Inns in our town have sold and they are not commercial anymore.
Our plan was to close for the required 2 years so we could sell as a private residence. Well we know what happened to real estate back then. So here we are. We are slightly different in that we only have 4 bedrooms and would easily be sold as a private residence.you are in a different league with 8 bedrooms. Not many need that size for a private home. Also consider you will need to pay back your business depreciation.. it stays with you forever.
here is a thought sell it for a group home of some sort. I bet your neighbors would love that
here is a thought sell it for a group home of some sort. I bet your neighbors would love that
Morticia
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The new owners can get a conventional loan IF they have outside revenue that will cover the mortgage. Yes, we know people who bought an existing inn, signs and all, by showing outside income to cover the payments.
Maybe it's dependent on where the bank is located and if they have experience with small business. Most banks don't. My entire state is small businesses. There's a lot of local banking experience with sole proprietorship.
Another option for getting a loan is thru the new owners retirement fund. They can loan themselves the money. (Not as simple as I just said, but not super difficult, either.)
Not sure if this helps your discussion, but it may open up options to lookers who don't know this already.
Maybe it's dependent on where the bank is located and if they have experience with small business. Most banks don't. My entire state is small businesses. There's a lot of local banking experience with sole proprietorship.
Another option for getting a loan is thru the new owners retirement fund. They can loan themselves the money. (Not as simple as I just said, but not super difficult, either.)
Not sure if this helps your discussion, but it may open up options to lookers who don't know this already.
Where did you get the 2 year rule?
And if anyone has money they can just buy it anyway. Yes, there are many opportunities.
I can't remember now for sure but an accountant at a bbav conference stated it
maybe muirford will remember him. Stated We had to be closed for 2 years before we could sell as a private home
lookup tax rules that apply to sale of primary residence
something in this tax code we had to follow to avoid penalty
we thought it was to avoid paying back depreciation but come to find out you always have to pay back the business depreciation
https://www.irs.gov/publications/p523/ar02.html
Momma Smurf
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Who doesn't take depreciation? Don't answer that, we did done deal
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I know a couple who did the close for 2 years and sell as residence. I will call her in the morning and ask for you. Her husband was on top of every penny HE could keep and not give to any tax man.
Momma Smurf
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We have not taken a penny, cause the POs warned us that we'd have to pay in the end, like they did.Who doesn't take depreciation? Don't answer that, we did done deal
.
OnTheShore
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A loss relative to your book value after accumulated depreciation? OK, no tax implications.
OnTheShore
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My thoughts on selling as a home vs. business -- you just need to structure your purchase and sale agreement to give you enough time to take down your sign and get rid of other evidence of your business operations before your buyer's lender's appraiser shows up. This also means that you're not hosting guests anymore....
For a residential mortgage, the lender wants to be assured that they are going to be paid back, which means they are looking for two things: (1) that the buyer has sufficient income to be able to comfortably make the expected monthly payment, and (2) that there is enough value in the property that the lender will not lose their shirt if they have to foreclose because the buyer stops making payments. For the latter, they are relying on the valuation provided by the appraiser that they hire (at the buyer's expense).
For a residential mortgage, the lender wants to be assured that they are going to be paid back, which means they are looking for two things: (1) that the buyer has sufficient income to be able to comfortably make the expected monthly payment, and (2) that there is enough value in the property that the lender will not lose their shirt if they have to foreclose because the buyer stops making payments. For the latter, they are relying on the valuation provided by the appraiser that they hire (at the buyer's expense).
Morticia
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Who doesn't take depreciation? Don't answer that, we did done deal
.
It's not that you have to pay back the depreciation dollar amount, it's that you to pay tax on it as it lowered your taxable income. Big difference in the amount of dollars involved.EmptyNest said:
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22 years ago there was a one-time exemption on capital taxes on the profit when selling your home. People usually reserved that for the sale of their final home when they retired d moved south or down-sized. I decided to take it when we sold the Illinois house because I did not expect to ever make that kind of gains again (he had bought it in 1971 for less than the cost of a car today), especially since we had a LOT of equity in it. Turns our to have been a smart move since THAT lovely item was removed a few years later.
Now all I have to do is find out how much depreciation I will have to pay back. THAT sucks!
