All Forum Posts by: Andy D.

I'm a bit surprised by some of the comments in this thread with respect to (single) women. Is this seriously how some people think? I personally despise that attitude. Then again, it's not relevant to the OP's question, really, as he clearly stated that he has no issue with this (which I can only approve of and therefore also voted on his very reasonable reply). And why should he. His question was a practical one, not one of judgement.

Thankfully, there were some sensible answers, such as having proper wording in the lease (which, in praxi, mostly does not help to prevent issues...) as well as doing checks, and - oh dear divine entity forbid - proper communication prior to concluding an agreement.

@Dan C. For what it's worth, I'd take a mix of what you have read here to discourage this for the future: have proper wording in the lease and, depending on the single (?) person's situation, specifically point out this fact should you get the feeling that this could be an "issue". It's about communication. Most people might not think of this being a relevant topic! Therefore one should point out reasons why it is relevant. Most people will understand such reasoning. I can't really see any issues deriving from such an approach. Certainly has worked for me! Good luck.

All good advice here given above. I'd go see a qualfied lawyer immediately as you are not only facing potential fines but also should get the money from your tenant which he/she most likely made on renting that place out (hello, HI!), i.e. profiting from your property without consent/contract. There are several issues here, some of which could cost you serious money. In addition, you should make that bastard pay, daring to profit from your property while at the same time violating the lease. So wrong on many levels! Make him/her pay. But get proper advice on next steps and don't do it on your own so as to not end up doing it wrong.

Hello BP world!

Looking for some input on 2 aspects: let's assume I have 2 Condos held in my own name where I want to do a cash-out refi (conventional/conforming) to use that cash to buy more properties.

Current cash flow on both units is excellent, covering everything like HOA, maintenance, vacancy, etc etc. and leaving a nice surplus.

1) My lender has asked if I would not want to do only 1 refi with the maximum possible payout, rather than 2 with a lower amount each. Reason? Cost of course. 1 refi vs 2 refi costs. Makes perfect sense and would save me a nice chunk of money, obviously. However, it would completely screw up the figures for the property which would then be refinanced.

Overall it would not change the figures much when looking at those two Condos and their cash flow/costs combined, though. As a matter of fact, it might actually be even slightly better re cash flow if I only refinance one when adding all the figures and dividing them by 2.

It's not commercial, so the DSCR on the property doesn't matter (much), and since I do have sufficient cash flow from other units to cover the "lack" of sufficient income from the refinanced property I'm wondering if I should go that route of doing only 1 refi.

Then again, assume that I sell all my other investments (not gonna happen) then I would have a problem if I kept only that one unit with insufficient cash flow. It would still be netting some say $100 cash (after HOA dues paid), but only when leaving aside maintenance, vacancy, CapEx etc.

What's your opinion on this?

2) Lender has given me several options/scenarios with different interest rates and therefore different loan origination fees. The cheapest interest rate would result in the highest costs but of course the lowest monthly (new) payment. Half a percent higher reduces the costs by some $1200, while only increasing the monthly payment by some $50. However, the interest portion is, of course, quite a bit higher in relation to the cheaper interest rate loan. The third loan would be another 25 basis points higher with again lower loan refi costs and some $30 higher monthly payment compared the one with .25% lower rate.

Interest payments are fully tax deductible. I'm in a very high tax bracket and have a significant tax bill due to my W2-income. Any deductions on my rental income save me money in tax payments, somewhat offsetting the fact that a higher interest rate simply is indeed a (higher) cost. I can't do the math myself, but my gutt tells me that a slightly higher interest rate, leading to higher tax deductions while at the same time reducing one-time refi costs will be more beneficial than aiming for the cheapest rate.

Any thoughts?

Interesting how some people react when all they get is good advice (for free!). And then they have the nerve to call them names. Way to go about living one's life. Must also be a stellar landlord that person! Byebye.

As @Natalie Kolodij has already asked: primary or rental? If it's your primary you should also check into the section 121 exclusion.

If it's a rental: 1031 is the way to avoid taxes on that particular sale transaction. But it's only a postponement until you eventually "cash out". However, your death would alleviate you of that "burden" and your heirs would actually get a step up. At least under the current rules. There is talk to possibly change that as you may have read.

With respect to gifting and lack of a step up: the impact of this could, I guess, also be postponed if the kids decide to continue to rent out the property and then later decide to move in themselves or do another 1031-exchange for something else that they rent out. And after say some 12 months they decide to change their mind and move in themselves since that particular property then is actually what they want as a residence (big enough, for instance, or right school district etc.). Obviously, should they then sell it without having previously made it a rental again and go 1031 again, then there would be capital gains tax. Assuming the property actually has - at that point - a value higher than the initial base (yours!).

In other words: once one cashes out - generally speaking - there will be taxes due if there is a gain. And, honestly, that's how it should be (at least where there is a capital gains tax to begin with; some countries don't have that).

But as @Dave Foster has said: consult an estate planer, especially since this property is probably not your only asset you have and plan on passing along. Don't forget, taxes is not the only thing to consider when it comes to proper structuring. Natalie would now probably shout: avoid probate! ;-)

While I'm no CPA I certainly don't do that. Why would I. My LLC's account is its bank account that I need to use for anything related to that LLC. Especially any expenses incurred within that LLC, such as repairs for a property owned by the LLC, for instance. If I were to constantly juggle funds between the LLC's account and my personal account I would be priming myself for piercing the corporate veil. So at this point I don't understand where you get that idea from.

Get yourself a proper real estate agent who will get you the relevant information. Why would you look for an agent on Craigslist??

If it has hit the MLS and has been sitting there for over a month then this definitely means one thing: not a good deal (at that price).

If you feel you really want that buildling then you could always place an offer 30% or so below asking. Simply the amount where you feel the place would be a good deal for you.

Also, 4-plexes are measured by comps. Have your agent run a few recent sales of comparable (!) 4-plexes. That will get you a feel for what should be reasonable "for the market". Still doesn't mean that it's going to be a good deal for you.

My gut tells me: skip this one. Not to mention that ~550 sq ft seems almost like a prison cell size... who do you expect to move in there when it comes to the kind of tenants.

With the information I use I don't have that many 8 year items. I indeed have 8 yrs for (only):

Water heater (so far every single one has lasted quite a bit longer than that...)

Appliances (they typically die on me in year three or so... damnit)

HVAC: 10

Flooring: 6

Fixtures: 10

Paint: 5

Components such as garage doors, breakers, etc: 10

Landscaping (where relevant): 5

Everything else is either 20 or 30 years. I have that from an Excel I came across a while ago. No idea if this is the right figures but it seems reasonable. It's anyway always an assumption, not to mention that the actual price figures you put in there will vary quite a bit depending on the region, simply because they also include the labour. And that varies greatly over the country from what I have seen so far. I wouldn't beat myself up. Also bear in mind that should there be an HOA then quite a few major line items are covered by the HOA (which of course doesn't mean that there then might not be a special assessment around the corner...).

@Bryan O. Yeah, I'm bored very seldomly ;-) but I will definitely need to have this looked into by someone knowledgable. I have not yet found that person.

Re calling the note: damn. But I guess one could just try to refinance with a different lender...

Good talk, Bryan! Thanks.

@Steve Rozenberg That question is far too narrow as far as I'm concerned. Because it really depends on the situation. So the way you phrase your questions I believe the only valid answer is "no". But that is a useless answer as it doesn't really answer anything...