Need Expert Advice... Owner has been listing on personal return

[Account Closed]

Hi all,

I'm in negotiations to purchase a small apartment in Hickory, NC.

After sending my offer, the owner's significant other has said there's an issue that she needs to discuss with her attorney.

He said that the "Main issue she has is the tax returns. She unfortunately doesn’t run it as a separate business and does it on her personal tax return. She can pull the expenses out the returns for apartments and list its income."

1. What impact is this going to have on buying the property?

2. This will make it harder for a buyer to qualify for a conventional loan, correct?

3. Will a bank lend on this?

4. Does this mean I'll need to buy the building with hard money or a master lease agreement?

Thank you!

Ben

[Jeff Kehl]

@Account Closed Most mom and pop investors report income and expenses from their rental properties on schedule E of their personal tax return so it shouldn't really affect you at all. The fact that they're concerned about it is good because it might make them more open to lower offers. 

What you need to concentrate on is making sure you have a good understanding of what the income and expenses are. You should ask them for this but if they say they don't have it you can put it together yourself. Did they give you a rent roll? You should be able to come up with income from that. Then figure out every potential expense using lists or calculators you'll find on BP.

Once you've built a profit/loss statement you can use it to determine what you'll pay and to show to potential lenders. Just make sure to be clear with the lender that you're using your estimates because the seller does not have actuals.