All Forum Posts by: Andy D.

Ooohh, some guys here will have a field day! Your brother did not do you any good by not factoring in depreciation - as a lurker you will most likely have read about "depreciation recapture" at the time of a sale. Irrespective of whether you claimed it over the years or not.

For the past I can't, unfortunately, tell you how to fix this and if it's even possible past the 3-year period during which you can amend your returns (which you probably should do together with a CPA)

 But what I would recommend is to file for an extension with the IRS so you have more time to have a CPA look into your situation rather than rush into a (mostlikely incorrect) filing. Not surprised that you can't get anything at this point in time, though - it's tax season. But maybe some of the tax guys here can actually help you on short notice, who knows.

Bear in mind that if you do get an extension to file you would still be required to pay any taxes that you owe by 18 April 2017. If you do not, you will be subject to penalties after that date. Then again, this only applies if you owe something and is also not the end of the world with respect to the amount of the penalty should you indeed owe something - which, at this point, you don't even know. But with your (combined) income, factoring in deprectiation, in all good reality you won't owe anything in addition to what was already withheld by your employers.

Obviously, the above is by no means tax advice nor intended to be tax advice. Just a fellow investor who paid the IRS here or there a bit more than he normally would have to LOL

You are aware that you will need a lender that will do a commercial loan, right? I recommend looking for a mortgage broker that has epxerience in the area of commercial loans. My experience with trying to find lenders on my one with which one can actually work when not being physically present has been - bad. You say you are Canadian but show FL as location. So I'm not sure what the deal is. Therefore, I can only recommend you find a mortgage broker with whom you establish a working relationship to support you also going forwad.

@Mike Bicho My opinion, for what it's worth: it's a waste of a lawyer's time = too expensive to use a lawyer to set up (= register) an LLC. That is a formality, more often than not done online. Why would you want to use someone with a $350 hourly rate to do that? Pointless.

Having said that, getting the paperwork that outlines the LLCs members, activity etc. (and: operating agreement) properly set up - that's when you definitely want to use a lawyer of the state in wich the LLC is registered/going to be registered.

As for the recommendations to use a lawyer friend: don't. ;-) This is business, and things will go wrong at some point. Don't involve friends for such situations. Use him, however, to get a good referral to a lawyer that is knowledgable in real estate business.

As for finding online services which you can use to register an LLC: just google and check the reviews. There are enough out there that support on a nationwide scale and guide you through the (easy) process. Complexity is low and therefore the level of required knowledge also does not need to be high. You can't do much wrong when it comes to registering. The important part is the underlying paperwork related to the proper setup of the LLC, see above.

Finally: are you sure you need an LLC? Do you know how to properly run one to actually reap the benefits from such a setup? Most people don't and the whole thing is completely pointless then...

@Rishi B. As for "outlet-specific usage": you could get a Wifi-Power-Outlet-plug that has the ability to measure/monitor power usage (watts, amps). Just take a look around e.g. Amazon to get an idea what's available. Obviously, you would have to have a Wifi-Router to which that plug can connect. ;-)

Looking at the amps and/or wattage you would be able to see if anything is drawing from the outlet. If you only have the pump connected to it then that would equate to seeing whether the pump is running or not. You need to ensure that the pumps numbers are within limits of what the wifi-plug can handle, though. That, however, doesn't help you if the pump is indeed not turning on.

Make sure that the trigger turning on the pump at a certain water level is actually at the right trigger-height and that the pump isn't being moved (even slightly). It goes without saying that the pump needs to be in the right spot where it can trigger every time if there is rain - and not only when it's basically too late for it to handle the onslaught of water that collects only if a certain amount of rain has come down.

Finally, you may want to think about taking measures that make a pump obsolete to begin with. I certainly wouldn't want such a setup in my properties if it can at all be avoided. Too many ways of failure. As you can see first hand. ;-)

@Aaron T. OP's situation is that a 12 month lease ended. As @Thomas S. pointed out, that (usually) warrants an increase in rent simply because 1 year has passed and rent should be adjusted because of this. It coincides with the lease becoming m2m and therefore the increase can be seen as being based on that rather than a "normal" increase based on time having passed by. Then again, I personally do mix the reasoning together because of the fact that m2m usually causes me more turnover and therefore costs compared to 1 year leases.

I have to admit, though, that so far this is a mixed pool of sorts since my 1 year lease tenants tend to actually leave after this year due to relocation etc while some of my m2m stay even longer than 12 months... So EMWV and I guess it's simply a matter of taste and local market customs. And as for building relationships with tenants: that has nothing to do with the rent amount. And: tenants have no loyalty...

@Joe Tubbs Sorry for being blunt, but you let it come to this and helped create this mess due to being an absentee landlord without, apparently, local property management to prevent such a situation. While it's no excuse for the tenants having done what they did - the property is your responsibility, and you messed up. I therefore second @Deborah Burian but would add to the "call it a lesson learned": really learn from this. You cannot continue the way you did. Doesn't work for anyone involved, i.e. neither you as landlord nor your tenants.

@Federico L. That sounds a bit on the low end, especially as you would have increased it to this amount for a new year's lease anyway. The increased amount is justified by the additional - albeit only: potential - increased turnover and its associated costs. You described some of it already.

In any case, your lease should state what happens when the (annual) lease term is over and all parties agree that tenant can stay. My lease states that it then automatically becomes a m2m with an increase of X in rent starting with the first month of the m2m agreement. If you do not have such a clause in your lease, you need to have tenant sign a new lease stating it's m2m and in which you stipulate the (increased) monthly rent amount. In your case I'd probably have raised it to $1750, though, but as I stated above that's all dependent on the individual circumstances and obviously your choice since you're the boss. ;-)

Can't say anything specific about FL but I have 30 days and see numbers such as "10% increase" floating around. Even in my SoCal units I'd have a hard time getting those 10% through. I see no point in enforcing a tenant change (because that's what invariably will happen if one goes too high) if and when I have a perfectly good tenant. Yes, he/she will leave eventually but the longer they stay (while having a fair market rent amount) the better for me. Plus I'm not some blood sucking landlord portraying the stereotype of said bloodsuckers. So in my case I typically go by a fixed amount between $50 and, maybe, $100. Obviously depends on the actual rent amount and everything else (demand!).

Short answer: customary seems to be a rent increase when changing from y2y to m2m. Amount depends on individual situation of property (and possibly tenant).

@Brian Garrett [refi for sudden deal] "just do it at that time" - you obviously have never financed anything, haven't you? ;-) The hoops you have to jump through, the paperwork, the (stupid) questions from the underwriter, the overlays, the... it takes a long time! Deal long gone by then.

And again, these are options. Everybody needs to chose what they think fits their situation best. Could be one, could be the other, could be a combination of both. Or none of it. ;-)

@Brian Garrett I really depends on the lender and your personal situation re terms.

But with a mortage you always (at least in this world) have an interest payment and typically also an amortization, i.e. payment on the principle. If no payment on the principle, there would be a balloon payment due at the end of the term. Since you received the money right away, your (monthly) payment starts at that point. Until the term is over. If you don't pay, you default, will be foreclosed on and lose your house - does ~2008 ring a bell? ;-)

For a HELOC I again give you the example of a (secured) credit card. Do you always use all available credit on (every) credit card? Hopefully not. So in that case you're not using the line of credit and therefore no interest will be due (and obviously no payment at all if you don't use any credit). That's a (HE)LOC. You use the money if you need it and pay it back if you don't. Merry go 'round. You pay, apart from some setup fees and possibly an annual fee (see above: depends), only when and as long as you use the money. A mortgage cannot simply be paid back and then paid out again. Doesn't work that way. A (HE)LOC does. But: you can also default, of course. But it might not be a recourse LOC, although it typically will be - lender wants a collateral for safety, obviously. You secure it against a property. The property therefore is at risk if you screw up: you owe money to someone!

I'm the best example with respect to these two options: I'm doing cash-out refis when I know that I want to expand my portfolio for sure in the foreseeable future. But I also have LOCs where I currently don't need the money in my account (which would cost me money in interest, especially since the money in the account wouldn't pay me any interest in this environment). But I'm ready to draw on it should an unexpected deal come by where I'd then use that money to jump in. Again, similar to a credit card that you pull out when you see that shiny new 65" TV that you had no intention of buying and also don't have the money sitting in the account. Alas, that's my Porsche example: I'd use my money to make me more money. Not waste it. ;-)

Options. Suitable for different situations.