Things to Consider When Buying a Small Business: Saving Money and Checking Cash Flow

You have numerous things to consider when buying a small business, even though buying an existing business has considerable opportunity. In the present, you’re ultimately saving money not having to start a small business from scratch, especially when a building already exists. The only thing you have to worry about is the future. And what those possible issues are can be scoped out by looking at the existing business’s past.

Cash Flow Issues

Study the financial past of the small business you’re buying and make sure they’ve maintained consistent cash flow. If they have, it means they don’t have lingering debts that could haunt you down the road once you start pulling in profit. Sometimes those debts can be hidden, so be sure to do a thorough financial investigation.

If you find out cash flow was consistent, it helps paint a slightly better picture about your next worry: A consistent customer base. [Read more…]

Capital gains and taxes on condo or single family home

Additional Information: 

I am selling a multi-family property and buying a condo or single family. How does capital gains work in this situation? I will be using most of the proceeds for the other property except $50,000.

ATTORNEY ANSWER:

As attorneys, we encourage our clients to obtain tax information from a certified public accountant. Taxes are obviously a very important issue. No one wants to pay more than they have to. Even though there are many occasions when clients will ask us a “tax question” and we know the answer–or at least think we do, we still encourage them to speak with a CPA. One of the reasons being that tax laws can change; the IRS can interpret rules/regulations differently after there has been a Court proceeding, and Attorneys have enough to do to stay on top of their own profession. So, when we are asked a tax related question, we tell our clients that they should get the answers and advice from a CPA.

 

A simple home inspection may not be enough

A couple who purchased a condo in a building that turned out to be contaminated with toxic chemicals can recover only 65% of their losses, because they could have arranged an environmental inspection of the property before they bought it but didn’t do so, the Michigan Court of Appeals recently decided.

The couple bought a condo unit in a converted factory. The developer had installed a vapor barrier, but never actually decontaminated the dangerous chemicals on the site.

The buyers claimed that the seller’s real estate agents assured them the site was safe. It appears the agents believed that was true at the time, but when they later found out that the site still had problems, they didn’t say anything.

According to the court, the agents could still be liable, because even though they didn’t technically lie, they had a legal obligation to tell the buyers about the problems once they knew about them.

[Read more…]

Do you have flood insurance?

Many people are surprised to discover that their standard homeowner’s insurance policy does not cover them in the event of a flood.

If you want flood insurance, you generally have to buy a separate policy. Typically these policies are sold by private insurers, but are backed by the U.S. Government through the National Flood Insurance Program.

Some federally backed mortgage programs require homeowners to buy flood insurance if they live in a high-risk area. Some private lenders require this as well, and they may require it even if the property is not in a high-risk area.

Just because a property is not in a high-risk area doesn’t mean that flooding is impossible.

You should note that just because a property is not in a high-risk area doesn’t mean that flooding is impossible. High-risk areas are typically low-lying regions that are subject to storm surges or overflowing rivers, but even property in a very low-risk area can still be flooded due to heavy rainfall, drainage system failures, or a broken water main.

[Read more…]

Massachusetts Landlords could be liable if tenant doesn’t pay contractor

If a tenant hires a contractor to make improvements to a property, but the tenant doesn’t pay the contractor in full, can the contractor sue the landlord for the difference?

It sounds unlikely, but it happened in one Massachusetts case recently.

Former Boston Celtics player Dana Barros leased a warehouse and hired a contractor to make improvements so he could turn it into a sports complex. Later, the contractor believed it hadn’t been paid in full, so it went to court against Barros and against the owner of the warehouse.

The warehouse owner argued that it couldn’t be sued because it was merely the landlord; it never signed an agreement with the contractor.

Most states have what are called “mechanic’s liens, such that if a contractor isn’t paid in full by someone for work on a property, it can place a lien on the person’s interest in the property.

[Read more…]

Know the tax rules when buying, selling, or refinancing your home

Owning a home in Massachusetts provides a lot of tax advantages. Sometimes, though, the rules can be tricky.

Here’s a brief introduction to some of the many tax rules involved in buying, selling, or refinancing a home. But remember, the rules are complicated, and there are always exceptions. You’ll want to consult a Massachusetts real estate attorney or tax advisor to see how the general rules apply to your specific situation.

  • If I own a home, can I deduct my mortgage interest payments?

Yes, home mortgage interest is generally deductible on your federal income tax return on loan amounts up to $1 million. To get the deduction, you’ll need to itemize your deductions on Schedule A. For most people, this is the primary tax advantage of owning a home.

Your lender will typically send you a notice at the end of the year telling you how much of your payments were for interest as opposed to principal.

[Read more…]

Who’s responsible for additional fees from FHA loan?

Additional Information:

The closing attorney for the sale of my home in Sudbury was aware of the necessity to payoff my FHA loan by a certain time to avoid additional fees. The payoff was rejected by my lender because is wasn’t a “certified check, cashier’s check, or bank wire”, as required by the lender’s Payoff Statement. After being contacted by lender, he then sent a certified check which was received after the deadline and I was charged additional interest and fees. He admitted to ignoring the lender’s requirements, but refuses to reimburse me because he was not responsible for the payoff of my loan. What can I do?

ATTORNEY ANSWER:

Unfortunately, paying off an FHA loan always presents the problem of making sure that the payoff money is received before the next due date. We suggest that if your lender chose the closing attorney, that you go back to your lender and tell them that it is their responsibility to either pay the additional interest and fees or get the closing attorney to do so. Otherwise call us so that we can assist you. [Read more…]

Are they legally obligated to cover the closing costs on our Ashland home?

Additional Information:

We’re buying a home in Ashland and the seller signed an agreement to pay for our closing cost but apparently he didn’t know that what he signed was actually to do this. The sellers now understand that what they signed is a concession towards our closing cost but they never intended to pay it. They don’t even have a real estate agent as they are trying to save some money.  Are they legally obligated to cover our closing costs and what can we do?

ATTORNEY ANSWER:
If the Agreement states that the Seller pays the Buyer’s closing costs, then the Seller is obligated to comply with the terms of the Agreement, or they will have breached the Agreement.  We’d be happy to review the agreement and your rights with you and determine next steps.  [Read more…]

Can I record a declaration of homestead for my home in Sherborn, MA?

Additional Information:

I own a three family home in Sherborn, Massachusetts and I want to record a declaration of homestead. I live in one of the units and rent out the other two. Can I do that? Will the declaration of homestead be effective? Does it matter that I live in the home?

ATTORNEY ANSWER:

In order to declare a Homestead, you must live in the house. We prepare Declaration of Homestead at no charge, as a courtesy to our clients. Call us now for an appointment to create a Declaration of Homestead.

[Read more…]

The buyer wants out of the contract to buy my home in Natick, MA.

Additional Information:

I’m not sure what to do.  The buyer now wants out of the contract to buy my home in Natick, MA. The contract has been signed by both parties. What are my rights, and do I have to keep my home?

ATTORNEY ANSWER:

You need to have a Lawyer review the contract as soon as possible to see what your rights are. If there is a deposit being held by the real estate broker, they will need you to sign a release in order to return the deposit to the buyer.

[Read more…]