All Forum Posts by: Casey Cu

Situation - We own condo (we paid 50k cash 2 years ago and have rented)

MIL is moving into the condo.
Mother in Law has about 60k in cash from sale of her house and 30k 401k, and she gets 2k per month SS.

Her health is realtively poor.
We are open to helping her financially some, but also want to protect her as she is not finacially super wise (She was recently ready to give a hospital a large amount of money because they said the insurance hadn't paid yet)
My wife is her only heir.

Option # 1 - Rent to her.. fair market is about 600 month.
Pros - Simpler, no Title Insurance, She has plenty of cash left to live on,

Option # 2 - Sell to her for about 65k.
Pros - Step up in basis when she passes. If she went to nursing home soon, she wouldn't have to spend all of her money before Medicaid kicked in.
Don't have to worry about her being conned out of money or wasting it. (although I now realize Medicaid might take the house after her death.. I guess that makes this not so great)

Option # 3 - Joint Tenanncy or Sell her half or other idea.
Pros... ?

Since all of our properties are in my name..... this makes sense to transfer to my wife on death. (avoids probate complications and maybe estate tax, if that is a concern... not for me)
However, since they are in an LLC in my name, I don't know if it affects my ability to do so... any thoughts.

http://www.transfer-on-death-deeds.com/transfer-on-death-deeds.com/Home.html

http://www.nolo.com/legal-encyclopedia/free-books/avoid-probate-book/chapter5-1.html

Thanks for the thoughts jon

Regarding selling the property now.. it is in an unusual pocket of Denver. I have a friend who is an agent/investor with over 15 properties in the area, they are recommending waiting 6 months as there is a significant glut of flips that have come on the market lately in that pocket, driving prices down.

I was presuming I could get a much better loan with 50-60% loan to value using the existing rental vs. 90 loan->value on the new property.

Purchasing 3rd Rental unit (50k 1br/1ba short sale)

own a rental house free and clear (about 100k), but plan on selling it in a year or two....

rental w/ 60% Loan-Value (190k-115k)
have about a 70% Loan-Value (243k-345k) on primary..

So I can't get 50k HELOC without going over 80%

Can't get HELOC on investment except Wells Fargo.. but high fees and cancel fees

Could do regular loan on rental, but hate to pay 2500 in fees when selling in a year or two...

Other Ideas?

I don't have any illusions that I'm the smartest Real Estate guy on the block, so I do appreciate your warning.

I'm probably more open to it, as I have another property that had declining values due to assesments, and then doubled in two years, after assements were over.

But I'm definitely trying to do my homework... in fact this is part of my homework :)

Thanks for the quick reply..

Zillow and the Realtor were just starting points. (I have friends that just built a 3/4 million dollar house 2 blocks away)

Yes HOA dues are huge, that's what's scaring everyone off. (and creating the opportunity).

That's why my question was what types of specific problems to look for.. and your response # 4 is a good one I didn't think of.

What is a CCR ?

Looking at condos listed at 80k - 90K in Colorado. All Zillowed at just over 200k. Currently one has rentor for 1200..
Everyone is scared off by short term increase in HOA fees (they raised HOA from 270 to 550)
When I talk to HOA president and look at minutes what do i need to ask???

I assume to verify they are not fixing big issue (mold or foundation problems) but actually doing capital improvements (new roof/ boiler upgrades) as stated by realtor.

Went and reat part of "Every Landlord's Tax Deduction Guide".

It states than non-depreciable/non-inprovement items like utilities and travel should be filed in this year as special "Section 195" expense which is not to exceed 5000 (or it can be spread out between 5000-50000)

Mileage and Utilities before the house was placed "in service" to rent are???

IRS says - "Not deductible at all". I asked.. so you are saying those are costs I eat with no deduction? answer "Yes"

My accountant disagrees.. he says they are expenses...

Tthis book says they should get rolled into Cost Basis of the house..
sample Bottom of page 161
http://books.google.com/books?id=Tz-AfKLCbtUC&pg=PT78&lpg=PT78&dq=rental+expenses+start+up+before+service&source=web&ots=Ht32crMTZ5&sig=qmTopLeRGgvPBWyYIoH4afvOJ70&hl=en#PPT80,M1

This is what is wrong with our Tax System.. Three phone calls to the IRS, Three Forum Posts, Two emails to my accountant, and I still have no idea how to book expense before my rental was in service.

Just got off the phone with IRS and they seemed to disgree with BMR's statements above...but it may be I didn't ask well...

Property purchased in July 07
Property ready to rent Oct 15 07

Expenses in Sept 07 and how to book according to IRS today...

Mileage & Utilities - Not deductible anywhere
Flooring - Into 27.5 house cost basis
Appliances - Normal depreciation (5 years as of 10/15)