All Forum Posts by: Alex Fenske

 If your basement is rented and is 750 sq ft, and the portion of the home you live in is 1,500 sq ft, that would mean 1/3 of the home is an investment. So 1/3 of your home's depreciable value can be depreciated, 1/3 of the utilities expensed, etc.

Generally you cannot deduct passive losses against active income and instead have to carry-forward the losses. Under certain circumstances you may be able to deduct $25k against active income, and if you meet the IRS definition of a "real estate professional" then you can deduct unlimited passive losses against active income. More info is here, but please ask a CPA. 

Should be able to expense or capitalize the work you do to the investment unit, and depreciate a prorated percentage of the property's value based on the sq ft of the investment unit relative to the whole. Same prorated deduction available for other expenses such as your insurance premium, utilities, etc. Ask a CPA to be sure though.

Welcome!!

Chicago area here! I lean a bit more towards Scotch than bourbon but enjoy them both. We end up stocking about 50/50 because my wife will drink my bourbon (she doesn't want her own glass, she just wants some of mine even if I'm not having some).

As far as Scotch goes, I really prefer the full-bodied, heavily-peated stuff from Islay and my favorite is the Lagavulin 16. Talisker 10 is an accessible single malt if you're coming from the bourbon side where things tend to be much smoother, like the Highland Scotches. 

Special warranty deed implies that there will be a title search, clean title, and title insurance provided at the closing table. I understand Michigan is not an "attorney state" for real estate closings, but given the circumstances (online auction, never bought one of these before), it may be in your interests to pay one a few hundred bucks to check everything over for you. 

Strongly recommend relying on an attorney to draft these documents, especially as a beginner but in my opinion forevermore. I've done a fair number of these transactions personally and would still have the attorney draft everything so I know it's done right. Been in court enough times to know I prefer to spend as little time as possible there.

Correct, you pay a year upfront at closing (either you pay out of pocket in advance of closing, or you pay at the closing table as a portion of all of your charges) and then make a monthly escrow contribution as well. When the bill comes due the next year, the money is there in the escrow account for them to pay it.

Taxes work similarly in that you are required to make an escrow deposit at closing and monthly contributions so that when the bill comes due, your escrow balance is sufficient to cover it.

If your escrow balance ever gets above a certain threshold they'll cut you a check. If it gets below a certain threshold they'll give you the option of chunking in the difference or spreading it out over the next 12 months (interest free).

As @Kevin Woodard said, all government-insured loans are assumable AND the borrower must qualify. If you can complete the assumption, the mortgage is removed completely from the seller's name and they walk away with no lasting liability the same as if you obtained a new loan. There still will be some fees involved, but somewhat lower than a new loan, and often you won't have to pay for an appraisal.

The catch here is that the buyer must be an owner occupant or, alternatively, willing to commit mortgage fraud. There are a very small number of assumable loans out there that were originally written as non-owner-occupant mortgages and therefore are assumable by new non-owner-occupants, but they are exceptionally rare.

Absolutely find an experienced agent whose advice you can rely on. I tried the "DIY" approach as a new investor and made some real bonehead mistakes that could have been easily avoided, particularly as it relates to valuations. I eventually became an agent and now help a lot of people avoid those same mistakes. 

Now, assuming this is a flip, if you find that agent and they tell you there are no accurate comps, that's a "walk-away" signal for me. Some clients have a knack for bringing me weird properties they want to buy, and I'm not shy about telling them how uncertain the ARV is and that they would be taking a huge risk to move forward with the project. If it's a rental, not as big of a deal as I would base the numbers more on cash flow.