All Forum Posts by: Adam P

Thanks to this thread prompting me, I just sold my last Colorado property.  Purchased in 2011 for $130k with $1200 rent, sold for $235k with $1450 a month rent.   Denver doesn't cash flow like it used to.

My current property manager has crashed with the economy, so I need a new one.  Does anyone have any recommendations / warnings based on their experiences?

This is Chicago, just be thankful you didn't need to evict them.  $1000 is nothing in the big scheme of things, and an eviction would cost you much more.

It is recommended you don't take security deposits in Chicago, due to the ultra tenant / lawyer friendly laws.  So collecting last month's rent from deadbeats is a cost of doing business here.  One of the reasons you can cash flow so well in nice areas, and another example of how local real estate is.

As a foreigner, I was really shocked when I learnt how American higher education worked.  When arguing about college, please leave out the best schools.  Those are fantastic value, and anyone that qualifies to get in, will most likely gain huge lifetime value out of that college.

The system is broken for average people.  College doesn't turn a below average intellect student into a superstar employee.  That's why there are so many starbucks workers with degrees.  The system due to student loans enables these students to take out loans with effectively no underwriting.  Federal Student loans should have exam standards before giving out the money.  These poor people then spend a lifetime trying to pay too much money back, while working average income jobs.

Obviously Trump sees right through this system, and setup a company to take advantage of it.  Trump University is no different to University of Phoenix, or hundreds of other institutions.

I wish a politician would come out and say "stop sending stupid kids to college", but it will never happen.  It isn't fair on the student, and cheapens the school/degree.  I have heard from my contractors, of their kids enrolling in a BS college, to get the loan, so they can pay for a car/vacation.  It is easier to take out the student loan, when no bank will give them a personal loan.

I am hoping a foreign real estate tax expert can help me on the top of foreign mortgage tax payoff gains, also known as section 988 of the tax code.

I purchased an investment property in Canada in 2013, and financed the property with a Canadian mortgage.  At the time, the US and Canadian dollars were par, so I borrowed $300k Canadian, which equaled $300k USD.  The property value was $330k.

Now that the Canadian dollar has crashed, if I were to sell my investment and pay off the mortgage, do I need to add the mortgage gain to my income taxes?  As $1 Canadian dollar only buys $0.75 US Dollars now, I would only be paying $300k Canadian which is today $225k USD.  So I "made" $75k on the exchange.

I could sell the property today for $375k CAD / $281k USD, which means I have a $49k loss in US Dollars.

In summary, I make $75k USD on the mortgage payoff, but lose $49k USD on the real estate.

I have read that the above example, tax is payable on a mortgage gain when an American sells their principle residences purchased overseas (there was a court case in the 90's which set the precedent, that a mortgage gain could not be offset against a real estate loss).

However, As I purchased the above as an investment property from day 1 (and have had it on my US taxes), could I offset the mortgage gain with the property loss?  I am struggling to find good information on whether section 988 would apply here.

I have been running into a similar issue.  In my opinion;

1) You should never institute a no smoking policy for an existing tenant.  The damage is done.  More smoking when they already smoke won't cause any further damage.  Just make sure it doesn't impact the neighbors.

2) Dog probably has to be grandfathered in.  Especially until lease expires.  As with smoking, the dog damage is already done anyway.  

3) I typically raise rents to about $100 - $150 under market value.  Turning a property with a long term tenant is very expensive.  There are probably multiple issues you don't even know about that they just live with.  I just delivered 7 letters last week on 2 buildings we recently purchased.  Some tenants are paying as low as $450 per month on units that I can rent in current state for $850, and rehabbed for $1200.  I have raised everyone's rent to $750, which is still cheapest in neighborhood, but is a significant rise for some.  Last year when I went through a similar process with 4 units, 2 left, and 2 stayed.  Those that stayed actually asked about staying very long term.  They knew they had an under market rent for years with an absent landlord, and were happy to pay still slightly under market rent for their home.

4) Remember that turning a unit with a long term tenant is typically at least 1 month vacant (as it can be hard to show units with long term tenants), painting costs, and I would add in up to another $1k on the unknown issues.  For the sake of $100 a month, that can be 2-3 years to break even, let alone all the work you need to do.  

5) If you feel you can get $650-$750 on open market, I would raise rents this year to $600, and then next year to $650, assuming they truly are good tenants.  That $1200 you lose in the first year, easily is offset by turn costs, and saving work time.  Spend your time and money elsewhere to make more money.

The gift card companies sell gift cards from a huge range of retailers at varying discounts.  I struggle to believe that they are all stolen.  Obviously crime rings are an issue for retailers, but they should be working with the gift card retailers online to manage the theft issue.  

I have run through about $50k worth of Home Depot gift cards.  I was pairing these with lowes movers coupons, but Home Depot here has stopped accepting the Lowes movers coupons.  

I have had a few bad gift cards, but they are all refunded by the company I bought off fairly quickly, and I would say it is only about 1% that are bad.  Typically you can get 7%-8% off using the gift cards, and they are really convenient for emailing to contractors for their purchases too.

FYI, you can get a bid at home depot for that discount on a larger order, and then pay with gift cards.  

 If the tenant doesn't perform the work as expected, and for some reason the tenant stops paying rent.  I would hate to be in eviction court, with a tenant claiming their rent increased as retaliation for not doing "free work" for their landlord.

I would raise the rent to market rates (or close to), and be very generous with what you pay the tenant for any work they can complete.  This protects you (if the work doesn't get done, you get full rent), and the tenant (they get to directly see value in the work they perform).

I love that so many people talk negatively about real estate investing.  If we competed with everyone to purchase properties, we could never cash flow or find decent investments.

Just look at wealthier areas in any city, you can't get anywhere near cash-flowing because all the wealthy people know about investing in real estate, and many do.

Never worry about what people less successful than you think about your wealth building endeavors.  I could go and give Tom Brady my opinion on his last loss, how much do you think he cares about my opinion? 

This is a really interesting topic. I have the same issue in Chicago, and need to provide tenants letters this week. In my case they are paying $500 per month. Rehabbed units are about $1100-$1200. In current condition, they could probably get $850 market rents, and I am thinking of raising rents to $750 in the hope some stay, and some go (giving me time to slowly rehab units rather than having too much work at the same time).

I would caution against giving a permanent rent decrease for a tenant working for you. You run the risk of the tenant not coming through on doing the work, and you are stuck with the lower rent. Personally I would raise the rent to what you want, and either hire the tenant separately, or give rental discounts when work is provided. I have a few units with tenants who are interested in doing rehab work, who either never follow through, or think I am a millionaire, and start quoting $100 per hour for their time.