All Forum Posts by: Bill B.

How would the bank even know the gross pay amount?

I don’t like it. 

Does your application ask what their work position is? Is it a position they could keep if they were in a different state than their employer? (Or maybe it’s big enough to have a TX branch?) Call them and verify employee status/account paychecks drawn on?

If you don’t want to hire a PM to manage your property I would at least hire one to do the screening.  Otherwise you have to pass. 

You especially need one side empty for any owner occupant buyers. The only thing a tenant does it prove the rent you can collect as opposed to a proforma of suggested rent. At least prepare solid rent history showing how much you collected and if it was paid on time. 

Assuming you paid $430k, put down 10% ($43k) so have a loan balance around $387k and $100k in equity means it’s worth $487k. After you sell you’ll probably net $457k? 

That's not a lot of tax savings but it does give you $68k so you can put down 10% on your $650k home. (I'd prefer you found a way to put down 20% and save the PMI as well as lower mortgage origination costs and on going interest costs. But if you don't have it, you don't have it.)

At least you made $25k tax free on your $43k in 2 years. 

I understand that for some reason you want to self manage. I do find it’s funny that you say managers are for people with more properties. I’d argue it’s the other way around. People who have more properties tend to eliminate the manager and bring it in house. Feel free to manage yourself and don’t consider thsi an argument against it, just things you may not have considered. 

1) You’re going to “guess” at the market rent.  You don’t have 500 or 1,000 other rentals in the area to judge market rent. There’s a 99% chance you’re going to ask to much and sit empty for an extra month or two. (Costing you more than hiring a PM.) or charge too little (Costing you more than hiring a PM.)

2) You are NOT going to know all the landlord laws. Do you have to keep the security deposit in a separate account? Do you have to pay interest? Is there a limit on how big it can be? Is there a limit on what you can charge as an application fee?  How much notice to raise rent, non-renew, post notices or start evictions?mDo you have to accept the first applicant that qualifies?

3) Are you going to face fines for fair housing violations? (Making judgements based on family status, number of kids, medical animals, etc etc..)

4) When you get that first repair call 10pm Saturday night for a leaking roof or water heater do you have a trusted/dependable guy to call and get it fixed that night?

I'm not saying you can't do it, I'm just saying it's not worth doing unless you're unemployed and like doing it or your rents are high and your maintenance is low. In which case I would hire a PM to screen and place the tenant and then self mange. I do this with my only out of state property. It's a townhome with $3,500/mo rent. The HOA takes care of everything outside of the studs and I save enough to just replace anything that breaks and skip the repairs.

A drain pan is a $50, maybe $100 piece of plastic that should have already been there unless they cracked it trying to install their washer. 

No chance the PM should go there ahead of time. But…the plumber should send picture of problem with an estimate to PM. If it’s over $250 they should call you for approval otherwise just fix it. Then they should send a picture of the fixed situation. 

As mentioned above. There wouldn’t be “a problem with the drain pan” unless the washer was overflowing. That’s its job. To protect the floor or more importantly the lower level ceiling in the case of a leak/overflow form the washer. 99% of them never do anything their entire life. i would have balked at a $500 estimate for that job.

Ps. This is just another argument for ALWAYS including appliances with a rental. You just paid more than buying a washer and dryer with delivery an installation. I wonder what it will cost you when they remove their washer dryer and damage the pan again. 

You need a new property manager tomorrow. 
 

1) They did a horrible job of screening tenants. (Couldn’t really afford the place, didn’t have good enough credit to be worried about an eviction, etc etc..)

2) They should have posted a 5-7-10 (depending on local laws) to “pay or quit” as soon as the ent was late and started eviction. These people should have been out a month ago. 

3) They should have a procedure for repairs and evictions that would have prevented this last minute “We asked for repairs” defense. 

These are the reasons you are paying them. This kind of stuff should only happen when you self-manage (or maybe hire someone who’s primarily a real estate agent not an PM.) and would be a good example of why I don’t. It literally costs you more than paying a manager. The 3 non-paying months would have paid for 3 years of management. Please switch to a better manager today. They’ll probably even help you with the eviction. Good luck. 

Pretend they are telling the truth. They are either going to be financially strapped or leave the area, or both. Get the 30 days and re-list it while they are still there. Keep the deposit towards additional rent if allowed by law and wish them the best of luck solving their problems. 

If they ghost you and leave the state at the end of the month how much are you really going to collect? What will be left of the security deposit if they feel they have no choice but to leave the property as is. Leaving you to move and store their items if required by law, clean and repair, etc etc. Worse yet. They stay for a couple months without paying because they literally can’t pay. Assuming you can get another tenant you don’t win by making them stay. Good luck. 

I think you’r paying the price for shady wholesalers. 

You could/should offer a small non-refundable EMD, say $5k if that's equal to a couple month's rent. You could also ask if you could do your inspection prior to going under contract and then make an offer without the inspection contingency.

The seller 100% does not want to go under contract with someone who isn’t going to close or is going to ask for a discount after it’s under contract. Prior to going pending the power is about 90/10 in favor of the seller after it’s us. Contract it’s about 80/20 for the buyer. 

The last property I sold I countered with 1) the buyer's inspection is a yes/no within 5 days, no discounts will be given. 2) they asked for $5k off and I countered with I would discount up to $5k but the amount of the discount is the amount of EMD that is non-refundable. They put up the non-refundable $5k and closed 45 days later, we were both happy. As a seller I wouldn't let anyone tie up my property that I wasn't AT LEAST 90% sure would close (not wanted to close, not said they would close.) and that number is probably closer to 95%.

TLDR: if you offer a couple months of “rent” as non-refundable earnest money you’ll probably get the deal. Add getting the inspection done prior to going pending and you should be fine. Good luck. 

Ask one of the charities that’s benefitting from your generosity? Especially one that will be inheriting a large donation like property. I’m sure they have people who do that kind of thing as part of their job description. 

George, you misread my post:

I said:

”Your friend has to tell the IRS he lost $900k so he wants a $200k tax refund.” (Assuming he paid $100k, is selling for $1M but tells the IRS $100k to avoid taxes and help you out.)

And I said…

“Lastly, don’t forget you’re also going to owe $250k in taxes if you sell the home for exactly the $1million you really paid to buy it. I doubt you’re going to get a stranger to take a $250k hit for you. ”

So  your friend has to tell the IRS he lost $900k and ask for a $250k tax refund. (Selling the home he paid $1M for and sold to you for $100k.) and then if you sell the home for exactly what you really paid ($1M) then you’ll owe the IrS $250k in taxes because you told them you only paid $100k and now sold for $1M. 
. 
Even if your friend only paid $500k for his $1M house he’s selling you. He could have sold tax free if married but instead he’s going to ask the IRS for an $80k refund ($500k paid, says he sold for $100k) but again you will ow $250k because you said you bought it for $100k and sell for $1M. 

Forget the VERY obvious (to the IRS) tax fraud. It actually creates more taxes owed total than your friend telling the truth to the IRS. You’re transferring tax burdens and it’s something they look for.  imagine the same scenario but your friend is a single investor and you’re a married owner occupant. 

He lies to the IRS and says he sold his $1M house he’s paid $500k for to you for $500k. He has no taxes owed. 2 years later you sell for $1M tax free as an owner occupant. They’re going to figure it out.

I understand you were basically asking a hypothetical. But the short answer is.. Nobody wants to go to jail for a stupid crime that’s obvious to detect. That’s why people don’t lie about sales prices.