All Forum Posts by: Jeffrey Honaker

Ok give me a few minutes...

Here is the appraisal in Google Docs

Day 2: Here is the deal I looked at on January 1st  and would like help crunching the numbers. I am new to all of the calculators and some of the terminology so please go easy on me. Thanks for any help. 

Here is the property checklist I did for the first time. 

Other pertinent information I think. The gentlemen that owns this is 87 years old and no longer deals with the property. The son and his wife maintain it. They are tired of dealing with it so they are beyond ready to sell since it was on the market a few years back and got no real offers that they wanted at the time. This time appears to be different and already stated that, "I would really like to get 100,000 for my dad out of the property." I think this also tells me that I can come in a little lower especially if that is what makes sense on the numbers. The ptacs work for now but could go out any time. Newer ones should release the use of that central heat that the owner pays for as the units are smaller in size. I can replace the ptacs myself also so that helps with the costs. That appears to be the only major updates the units need. One unit could receive some TLC but again I don't believe it is dire at this time. It is totally satisfactory IMO. The other upside is the rent is a little low in my opinion and I would remove 3/4 tenants. the rent is 450, 425,425 and 375. I think the one bedrooms could be 475-500 and the two bedrooms could be 525-575. I would raise the only tenants who i think qualify as good tenants up 50 bucks to 475 for their one bedroom and clean everyone else out and re-rent it at a more appropriate rate. The goal being to gross 2000 a month to leave as much room on the bone for all other expenses and to make it more attractive to the bank. Lastly they are willing to do a lease purchase agreement which is the most advantageous to both of the parties I do believe since I now have experience with this technique. 

*I do know the sellers son so remember that as I don't want to mar any friendships with them 

*I need help applying these numbers to a calculator as I believe that is the next step if there is anyway I can get someone to help with    that. 

Here's an appraisal from 2011

Hello everyone. Recent events in my life have forced my hand to be a full time real estate investor whether I was ready or not. In February of this year I was officially diagnosed with Marfan Syndrome. This condition is mostly invisible to the average gawker but is rather deadly untreated and undiagnosed. I am one of the lucky ones however and had early detection. The bad side is I can no longer perform my duties as a letter carrier or work a traditional 9-5 because of the degenerative nature of Marfans. I’m going through the disability process currently but nothing is guaranteed. Needless to say, but I need to figure out something in this real estate venture or I’m going to be in dire straits.

Last night I logged on to BiggerPockets and committed fully and decided that real estate investing is what I am and it’s what I’m gonna do. I upgraded to a pro membership and got to work right away. I have no safety net at this time. So I have to create one. I believe in the power of real estate and this community to help me achieve financial freedom through real estate. I have no other avenue. This is my resolution to myself.

I started buying property in 2014 and at years end 2018 I have 7 units. 3 duplexes and one single family home that I live in with my family. I’m been very fortunate so far and this has been a boon to my bottom line. But real estate is expensive. Naturally my postal salary helped with this venture as I was always able to rely on that to prove my buying power and could show the almighty W2 to the bank when it came time to purchase. This is not the case anymore.

I, however, didn’t want that to slow me down. Why just today I went and looked at a quadplex. This being a natural progression from my current buying habits as I want to scale to bigger and better. It was made easy with the checklist and other forms I printed from the website too. Because of that I was able to check all the most important things and I’m currently estimating a repair cost as well. (My next post will be asking help on this deal to make sure everything is going properly.)

I’m naturally most worried about how can I get this deal done without a regular job? I talked to a local bank recently and they said they were willing to work with me based on the merit of my rental business alone as long as I can have some strong numbers. I informed the sellers of this fact and notified them I would like to buy it through a lease purchase agreement as that is the cheapest way for me to get inside of this off market deal. If I can land this I believe I could cross over into the financial freedom zone as the number is much easier to grasp with my lifestyle and the cost of living in West Virginia.

I hope to continue on this journey. This post is for me and to make my commitment known. To breath life into this dream that I’ve had since I was 19. I have literally been saving money since that time to realize this dream one day. The time is now. You got this.

@Ashish Acharya thank you. The lease purchase is only for a year until I can take it to the bank and they will buy out the seller so the IRS should be viewing this lease as the actual purchase date of this property correct? So when I go to the bank in July of this year I'll have a traditional loan from Chase bank.  That is where the confusion is on me "buying" and "intending" to buy. 

I would say my payments fall under the fair market value because I know this person and they were struggling with money so I got an amazing deal. I bought 3 units total. One is a duplex with 5bed/2bath upstairs and a 2bed/1bath downstairs, and a single family with 5bed/2bath as well with space to add another unit in the basement comparable to the 2bed/1bath. I paid 110,000 with 3k down and 500 dollars a month until the 12th or 13th payment when I take it to the bank. So my payment will be more once i complete that transaction.  

As for the write-offs, I've left the property in service and updated and repaired:

1. I added washers and dryers to both units in the duplex

2. I updated the electricity upstairs

3. I added a floor in the loft upstairs

4. I added a more secure door on the back entry upstairs

5. I put up a wall to divide a large bedroom into two and added a separate entryway to increase the number of rooms upstairs

6. I painted upstairs

7. I fixed leaky water and gas pipes. 

8. I added a newer oven and refrigerator upstairs.

I talked to a CPA as well who is a friend of mine that I didn't even think to ask. That was sound advice but where I am so small and only have 7 units total, I want to be able to know how to do everything correctly and legally. Turbotax makes it easy but ultimately my main concern is there is no option to add a property under the lease purchase or installment sale distinction. I'm worried because if I leave it how I have it now under Turbotax, so many of the boxes are blank like; lender, taxes, legal fees etc. it may raise a red flag to the IRS. But I do not have any of those things yet and just want a hassle free time return. 

But I do appreciate your help so far as it was very good advice. 

I bought two houses on the same deed in a lease purchase agreement in July 2017. I live in the single family and rent out the duplex. I have made repairs on the duplex and collected rent as well while also paying rent to the seller. I am intending to buy the property in July 2018. The IRS says it makes a distinction if it’s a true lease or if the buyer is likely to buy. I would like to know:

1. How to I file this on my taxes? I am using turbo tax but they don’t seem to have a catergory for this type of transaction. 

2. Can I write off my expenses for this deal? I have read that you can write off the payments but the language is so confusing I’m not sure who to believe. 

Help! 

Thanks,

Jeff Honaker