All Forum Posts by: Clayton Smith

Thank you to everyone for the feedback. I am still trying to decide what would a lender rather see for future loans. taxable income through my business or equity in another property? I have a decent amount of equity in my properties but I have only had my LLC for less than a year so I do not show much history as far as income yet.

I guess I should have included some more information about my past investments. 

I have flipped 3 properties this year, my first flips, but I own 15 rentals. I am currently renovating two other rentals that I will hold for an investment property. I have also BRRRR'd properties in past years. I got a renovation loan on the property that will convert into long term financing once renovations were complete. I have not claimed depreciation because I just bought the property in April. I am not very far in the renovation but I have emails with my property manager talking about how much to charge for rent based on adding an additional bedroom. I understand the IRS guidelines on the 1031 but I believe my behavior does show that at the time of purchase I intended to hold long term. That is why my CPA gave this advise.

I purchased a property earlier this year that was in terrible shape and I believed it was a teardown so I got it for the land value. I planned to BRRRR the property. I cleaned the property and lot up and repaired the structure and it was not in as bad as shape as I originally thought. I got a cold call from a fellow investor and I threw out a high purchase price and he agreed. So I stand to make just under a $25k profit selling the property. I started my LLC last year and this will be the first time I show income and would like to finance my deals based on my LLCs income and not personal in the future.

My question is do I show the income on my taxes to help with loans or do I 1031 exchange the property and defer the taxes? Since I just bought the property I have not claimed any depreciation. This will be my 3rd flip this year so I will show around $75k in income plus my rental cashflow. Just want to get some advice on how to move forward. I have talked to my CPA and he said since the buyer contacted me unsolicited it will meet the 1031 rules on intent of the investment when purchased. Any advise would be great.  

I just know my market. They have tenants in place and based on the current rent the house is undervalued. DSCR will be around 2 even if I finance 90% of the purchase price.

You depreciate the property when you file taxes. This results in less tax paid when you have rental income coming in. But if you plan to sell the property in 3-4 years and be finished with Real Estate be careful because you will need to pay the depreciation on your taxes for the year of the sale. The real question to me is are you paying the rent or your daughter? If she is looking at spending $600 a month for 4 years that is a lot of money. Even if you purchase a house and she has roommates that cover the mortgage and nothing else you are still looking at saving money on that rent you would have paid otherwise. She has to have housing either way. If she is paying the rent herself with student loans or whatever then she needs to be thinking about these things and she can get a loan with less money out of pocket. If you purchase the house and you plan on helping her pay for housing I would not charge her market rent. That is just creating a taxable income that you is just moving from one account you own to another!

Is it possible for all the bigger pockets small landlords to file a class action lawsuit against the evection ban? If the government is responsible for landlords not having control over their properties then we should be compensated right? Guarantee Blockrock is getting a government bailout if tenants don't pay them. Has anybody been able to make the government reimburse you for missed rents? 

@Stephanie Medellin
What if you are buying a turn key rental with a lease in place until July 31st 2022? What is the best way to find a lender that will loan of the DSCR for something like that? Home is being offered under market value so I would rather not have to put 20% of purchase cost as a down payment.

I came across a few turnkey single families that are for sale under market value. Is there a lender that will loan based on the appraisal of the property and not the purchase price? They look great except I don't want to lock up that much capital for a long period of time. 

Sure. I am happy to help.