All Forum Posts by: Charles M.

Great looking resource @Harper Jones, Thanks! Have you used anyone through that website yourself?

Thanks @Chris Eaker & @Victor Jernigan! Good leads!

My wife and I will be relocating to the greater Knoxville area from CA in the next couple months. Looking for a local CPA experienced in handling tax returns with rental properties (existing depreciation schedules) and sporadic w2 or other income(s). Someone who owns or has owned rental properties themselves would be a plus. We'll also obviously be looking to make the most of our moving expense deductions. If you know anyone or are someone who fits the bill, please reply or inbox me.

Thanks so much! -Charles McNelly

My wife & I bought our first home in '05 in central CA just before the height of the bubble for 142k, spent another roughly 15k in renovations so let's round up all in cost at 160k. After the crash, we moved and rented it out. We are currently negatively cashflowing about -$100/mo. I've been told by professionals in the area that it could sell in today's market around 120k (for round numbers, easy math). Mortgage balance is about 105k at 5.875% with 18 years left on 30yr loan.

Refi option: We've looked into refinancing (4%-ish) a year or so ago and it didn't seem to make sense from a cashflow standpoint as I recall the payment would have adjusted to a monthly net zero cashflow but would take us 4-5 years to recoup closing costs from the monthly "savings", plus that new mortgage would then begin a new 30 year schedule (for a $0 cashflow rental).

Sell option: On the other hand, if we sell the property, the way I understand it, we could deduct the difference of Purchase price - Sale price as an "ordinary loss" on our tax return. It gets a little messy with depreciation and I need to get more clarity from my CPA on how it's factored in the loss category. I'm still unsure about if or how the cash we receive from the sale is treated tax-wise also.Keep in mind that we're all in 160k and only selling for 120k not counting the negative cashflow scenario for the past several years.

Ordinary loss: 142,000 - 120,000 = -$22,000 (so this amount would lower our taxable income).

Sale proceeds: 120,000 - 105,000 = +$10,000 (sale price minus mortgage & estimated closing costs).

My payment is for the most part not going to change much (as long as insurance and taxes don't get crazy) but rents can go up in the forseeable future years and I may net zero that way buy doing nothing. Expenses are about as low as I can get them and property management fees have also been renegotiated well below avg PM fees in the area. Also we have other income producing properties performing very well that offset this small monthly loss so it's not going to kill us to hold the property.

I'm open to any number crunching, tax advice, corrections to my very rough numbers but ultimately I'd like feedback on whether or not it makes sense to sell this dud or continue holding it forever or until we get closer to our original all-in price so my pride doesn't suffer too much from cutting our losses. :) Thanks for any feedback you're willing to offer up!!!

Curiosity got the best of me. I just ran a google search for "Texas property tax rate" and found all kinds of good stuff. These seem to be in your neck of the woods. Based on 145k assessed value; Dallas county = 2.186% = $3170yr, Ellis county = 2.339% = $3392yr. It's different by county AND zip code so these may be off a bit but will get you in the ballpark.

I'm afraid you're still missing much of your expenses in only considering insurance but @Jay Orlauskihit some of them. The state of TX property taxes are much higher than the 1.25% mentioned as CA has a ceiling of how much taxes can be raised each year thanks to CA Prop 13 enacted in 1978. TX has higher property taxes to offset no state income tax along with other lower tax rates respective to other states. Research your tax rate to get an accurate idea! Also consider the costs of property mgmnt (+/-10% of gmr), vacancy rate (area specific, but 7-10% of gmr is a good start), and have a good home inspector do a once over so in case you missed something you can haggle and have an idea of potential upcoming repairs. We all miss stuff. If you want to verify that $1200mo rent the seller mentioned, you can call around to local property mgmnt companys and get a second or third opinion too. Get the clearest possible idea of real world cashflow before you invest. Sounds like you found a good opportunity though! Good luck!

Rob,

Sorry to hear about your current situation. First off, I would expect some amount of chaos in the beginning of a transition period, both in the new relationship between you and a new PM as you "train" them about your expectations and also for them to tackle existing issues with tenant behavior modifications needed for inherited tenants. I use PM's for my entire portfolio and am extremely happy with the services provided (in the Visalia/Tulare areas). I too, work full-time.

That aside, the poor decisions, non-responsiveness, exorbitant repair charges, lack of detailed answers to your inquiries, etc. are each potentially deal-breakers on their own but collectively, I'd absolutely be be jumping ship if it were my property.

I haven't yet changed PM's or term'd a PM agreement so I cannot speak to the specific legalities but would certainly assume that if I were in your shoes, I would shop around NOW! Cancel/disapprove all non-emergency repairs and evictions until new Mgmnt is in place. Get a new PM lined up first so you don't have to manage in between. I would make an appt. w/ current PM, take a couple hours off work, have a physical list of grievances with a copy to retain for your records, inform them of your dissatisfaction and demand that they waive any early termination clause and/or fee's (if applicable) associated with that. In addition, I would have some type of dated, liability waiver written up for them to sign that states in writing that they legally waive all interest in the existing contract that specifically renders existing contract null and void as of a certain date and time and releases you of any and all obligations of said contract. Regadless of fee's though, even if they will charge and won't waive early termination fee's the $3-500 fee (if applicable, likely not) will be WELL worth the investment to exit this relationship.

Specific responses to your bullet points:

- Nothing wrong or abnormal about PM having it's own handyman/repair company or in-house personnel. Feels like a conflict of interest but it can aid in lowering repair costs, responsiveness & times.

- I thought the same thing when I first started out. However in today's environment, vacancies are likely to be filled in less than 1-3 weeks in this area with limited advertising. More exposure is always better but it hasn't been used or need in my situation yet.

- Inexcusable.

- Inexcusable. Get it together people!!!

- I can't speak to the legalities of needing an eviction lawyer for small claims but I wouldn't think it's a requirement, legally speaking. However, any good PM will have this type of attorney on call to represent their case to the judge AND PM will be present in court for each and every eviction hearing on your behalf. (If I remember correctly, my only eviction cost me about $3-500 in attorney fees).

- Cleaning fees, depends what specifically was cleaned and why. If it was in any way due to tenant not leaving unit as they acquired it, then it should be withheld from tenant deposit.

- Inexcusable. I've had repair quotes anywhere from same day to no more than a week out.

- Bed bugs.I have no experience here.

- You should absolutely be using excel, quicken or a piece of paper every month/every unit to reconcile gross rent, all expenses and draw. Mistakes happen and consistent, owner diligence is the only real solution and no doubt, some PM software ledgers are horrible to understand and PM should be able to clearly explain every, single question regarding your statement(s) and on the day of your inquiry. However, in my experience, if you are finding more than one error every 6 months...the PM needs a serious conversation at the very least.

I don't use any Fresno based PM's at this time. Hopefully the next few comments will be able to give local recommendations. In the meantime I use & would very highly recommend;

- Investors Prop. Mgmnt, 103 W Tulare Ave, Visalia, CA 93277 (559) 733-8360 ask for Lyn.

- Total Prop. Mgmnt, 144 N M St, Tulare, CA 93274 (559) 687-2780 ask for David.

Hang in there, Rob & good luck!

- Charles McNelly

Yes. Also, if you're buying to hold, be sure to inform your insurance agent of wood shake roof when you get quote as your premiums will also be affected = less cashflow.

I use; Investors Property Management (559) 733-4163 103 W Tulare Ave Visalia, CA 93277 Ask for Lyn

I'd also recommend that you go to the BP blog page and run a search for "lifestyle design". This topic has been discussed in depth if you're willing to read up on it. There was also a great podcast interview with Paula Pant on the subject, somewhere in the 30's I believe.