Rental refinancing

DEAR BOB: I own rental properties in Nevada and New Mexico, and I am paying 7.5-percent and 9-percent interest on their mortgages. I want to refinance, but I am having a difficult time getting lower interest rates.

I have contacted two mortgage brokers. They quote me 7.515 and 7.6 percent, plus $2,225 and $4,767 loan fees for each property. Where can I get better refinance terms?

-- Elsie H.

DEAR ELSIE: Stop dreaming. With owner-occupied home mortgage interest rates currently around 7 percent, your 7.5-percent interest rate loan on one of those rental properties is excellent. Forget about refinancing that mortgage.

As for the 9-percent interest rate mortgage, you can easily refinance to lower that rate. Start by contacting the current lender. Ask to have the interest rate lowered to 7.5 percent, for example, with a one-point loan fee. In your letter to the lender, point out their alternative is to lose an excellent mortgage from a borrower like you, who always makes on-time payments.

If that doesn't work, contact an experienced mortgage broker near the property who specializes in rental mortgages.

Subdividing property requires expert legal help
DEAR BOB: An elderly friend owns and lives in her personal residence on 22 acres. Her adjusted cost basis is only about $10,000 for the entire property. The land is zoned both commercial and residential. She wants to carve out her residence with two acres and sell the remaining 20 acres, which are worth about $70,000 per acre.

Can she do this and retain her $250,000 home-sale exemption if she sells her home in the future? As she has very low property taxes, can she retain those low taxes if she sells off 20 acres?

-- Dick K.

DEAR DICK: The easy answer to your first question is yes, your friend can retain her $250,000 principal residence sale tax exemption for her home. Internal Revenue Code 121 is available for such sales, including a reasonable amount of surrounding land. Two acres should easily qualify as part of her principal residence sale in the future.

The tougher question is about retaining her low taxes if she were to sell off 20 acres. Your friend should hire an experienced attorney who is familiar with subdividing land.

Before your friend can sell the 20 acres, the property must be legally subdivided. This probably will require county or city approvals, which might trigger reassessment of your friend's remaining residence property.

Please send your questions to Robert Bruss, 251 Park Road, Burlingame, CA 94010 or www.bobbruss.com.

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