All Forum Posts by: Dominic Mazzarella

Repairs were going to be paid for before closing, as the seller having some other time sensitive activities needing to be met, my agent and I decided to grant a seller credit to the buyer for these repairs. Otherwise the hold up of the sale and going back-and-forth we wanted to avoid.

Because it’s now on the closing statement, are these a deductible repair expense like it would have been had it been before closing that would normally just be under schedule E as a repair expense.

Cheers.

Since the seller credit is now part of the closing statement, it’s generally treated as an adjustment to the purchase price rather than a direct repair expense. That means it likely wouldn’t be deductible under Schedule E the same way an out-of-pocket repair before closing would have been. Instead, it could impact your cost basis in the property, which would affect depreciation and future tax calculations. Has the property closed?

Yes, last year and that’s all over with now. I thought about this when I was getting all my documents together for this years taxes.

Impact cost basis, how may I ask?

Since the credit was applied at closing, it likely reduced the buyer’s cost basis rather than being deductible as a repair expense. Essentially, instead of being able to write it off immediately, it lowers the purchase price for tax purposes, meaning depreciation will be calculated on a slightly lower amount over time. If you’re still sorting through your taxes, it might be worth running it by your accountant.

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Quote from @Daria B.:

Because it’s now on the closing statement, are these a deductible repair expense like it would have been had it been before closing that would normally just be under schedule E as a repair expense.

Cheers.

1 Vote

Quote from @Brooke Morton:

Does anyone have recommendations for condo/HOA insurance? My STR's HOA needs to shop for group quotes. If anyone has any recommendations, that would be stellar. Thank you!

I don’t have a specific recommendation off the top of my head, but for HOA/condo insurance, it’s usually best to start with a broker who specializes in multifamily or association policies. Since you're in Destin, you might want to check with local firms that have experience with STR-heavy communities, as they’ll be familiar with the risks and requirements. You could also ask other nearby HOAs who they use. Sometimes they’ve already negotiated solid group rates.

1 Vote

Destin, Florida

Quote from @Josh Deschene:

Hello All,

This is my first post and I will try to summarize as clearly as possible. I am looking for advise on how to structure a deal that involves my fiancé and I buying her parents 4-Plex house. I think I have a solution in mind but since this would be my first deal I may be missing something important. The added variable is my fiancé has a sister, whom her parents want to leave something to when they pass (they are 80 and 70 years old, respectively).

Facts

1. The house is a 4-Plex in Webster, MA, with the largest apartment on ground level that is currently occupied by her parents.

2. (1) Apartment is currently rented without a lease.

3. The (2) remaining apartments are vacant and will need some work to be livable.

4. The parents owe roughly $40k on the mortgage.

5. I'm assuming the House is worth roughly $400k.

Goals

1. Parents: Want to be able to leave something to my fiancé and her sister when they pass away. All they have is their house. They also prefer not to move out since they are older and are comfortable where they are.

2. Sister: Wants to make sure her parents are not taken advantage of. She prefers they sell the house right now, as is, and live off their profit. However, this would force them to move out, lose their current rental income, and have to pay rent off their limited salary.

3. Us: We want to buy the property, fix up the (3) apartments not occupied by her parents to generate rental income.

Questions

My thoughts are to work out a deal where we purchase the property from her parents without taking a loan from bank. I have a HELOC open on my primary residence to fund any renovations. My thought is to structure a deal where we borrow her parents equity from them and pay them in monthly installments once we get the apartments rented. I see it as no different from borrowing from a bank. Her parents would have some income coming in with interest, and we wouldn't need a sizeable down payment to purchase the house. I also figured that when he parents do pass down the road, we could refinance through a bank and pay off the sister her half of the home, while still keeping the house and the rental income. At that time we could renovate the ground floor apartment and potentially turn it into (2) apartments for a total of (5).

My questions come down to how do we deal with the existing 40k mortgage, whether we can make it work so her parents aren't paying much in rent, if anything at all, and whether or not we set up any legal entity, like a trust to help the legal situation of paying off her sister down the road.

Anyone who can provide useful advice would be appreciated. Happy to add more detail if necessary. Thanks in advance!

It sounds like there's a good bit of equity in the property, that's a good thing. One option is to buy the home and pay them out in installments rather than taking out a bank loan right away. That way, they get steady income, and you avoid a big down payment. You could use a HELOC from your primary residence to fund renovations and rent out the vacant units to start generating income. Later, you could refinance, pay off the sister's share, and potentially renovate further to add value.

The big questions seem to be how to handle the mortgage so the parents aren’t stuck paying rent and whether setting up a trust or another legal structure makes sense for passing ownership smoothly. You'll probably get some good ideas here, but I'd suggest talking to a real estate attorney soon and maybe run some of these ideas by them.

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Quote from @Anastasia P.:

Hi! I recently bought 5 pieces of land all in Michigan -- one is in Jackson and the other four are in Saginaw. I purchased all at $300 each and am thinking of placing cashflowing assets on them instead of reselling them, since resell value is around $1200-$3000 each.

Does anybody here recommend any mentors/resources/tools/or has experience doing it themselves and would be open to connecting? It's even better if you've done it with land that was purchased at an auction! I have no idea where to start, as there are so many resources online.

Any other ideas that are beginner friendly are welcomed too. These are all in residential areas.

Thank you in advance and I appreciate any help I could get!

Anastasia

That’s a great deal for land, especially in residential areas. If you're considering mobile homes, the first step is checking zoning laws and utility access since some areas have restrictions.

For resources, Mobile Home University is a well-known starting point, and local mobile home dealers can offer insights on placement and financing.

If mobile homes are allowed, you could either rent them yourself for higher returns but more management or rent out the lots for steady cash flow with less work.

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Quote from @Sean Regan:

Getting ready to list my first rental property after an extensive reno. The punch list is taking forever to finish! I'm curious what more experienced investors will leave to finish repairing after they list the property, but before they start to show it (or lease it).

It depends on the type of repairs, but generally, anything cosmetic or minor can wait until after listing. Things like touch-up paint, minor trim fixes, and final deep cleaning can often be done while showing the property. However, anything that impacts functionality like plumbing, HVAC, or safety issues should be handled before listing to avoid turning off potential renters/buyers.

If you’re re planning to lease it, tenants will expect everything to be move-in ready before signing. But if it’s a sale, some buyers might be okay with a few unfinished details, especially if you disclose them upfront. Then again, they may not. What’s left on your punch list?

1 Vote

Charlotte, North Carolina

Quote from @John Winters:

Dominic Mazzarella & Obed Calixte ~

Thank you both for sharing some feedback. I really appreciate it. It's been a few days; please pardon my delay in responding.

Dominic, I agree with your cautions. I'll check around with some lenders to see what they share about their comfort with the timeline - whether HELOC or not.

Obed, YES, that's right. I definitely forgot those important details. Thank you. I guess I could do some work-arounds -- maybe reserve one unit in the first purchase for use as an AirBnb, and reserve my own time in it when needed - instead of claiming it as a primary.

Are either of you (or anyone) familiar with a finance product/loan that will allow me to purchase under $150,000 (w/ strong credit) and do much of my own work and live-in a portion as a primary residence?

Thanks again to you both for your feedback.

Not off the top of my head, sorry.

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Quote from @Marlena Hawkins:

Does anyone know what insurance (liability, E&O etc.) is required for Property Management companies in DC and Maryland?

@Marlena Hawkins

In Washington, D.C., property management companies aren't legally required to carry general liability insurance, but it's highly recommended for protection against bodily injury or property damage claims. Workers' compensation insurance is mandatory if you have employees. Errors & Omissions (E&O) insurance isn't legally required but is essential to cover claims of professional negligence.

In Maryland, the requirements are similar. There's no specific law mandating general liability insurance, but it's a smart move to have it. If you employ staff, workers' compensation insurance is required. E&O insurance isn't mandated but is a standard practice in the industry to protect against mistakes or oversights.

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Washington, DC

Quote from @Jade Frank:

We own a home in Kaukauna wi and it's a 3 bedroom 2 bath house. I threw it into the cash flow calculator and it said it would either even out or it willl have a monthly cash flow of around 300$. I set my rent standards a little high and realized that rent is actually not that high.. we have a morgage on it and it looks like the house is selling for more than we originally paid 4 years ago. We plan to buy a second house as well. Should we sell this one and invest in a new one and start fresh? Or should we keep the one in Kaukauna and attempt to rent it out? I'm still new to real estate investing but I'm open to feedback

@Jade Frank

It really depends on your long-term goals. If you're looking for appreciation and are comfortable with being a landlord, keeping it as a rental could work, especially if it's cash-flowing $300/month. But if you'd rather take the equity and reinvest in something with better returns or less hassle, selling might be the better move. One thing to consider is how hands-on you want to be. Managing a rental (even if it cash flows) comes with responsibilities, and it might not be worth it for $300 a month. Have you looked into property management options or run numbers factoring in potential vacancies and maintenance?

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Green Bay, Wisconsin

Quote from @Edreco Amos:

@Dominic Mazzarella

Thank you for the quick response. I will take this advice into consideration. What are your thoughts on Airbnb properties? Are they worth it? I've been checking HOA CC&Rs to make sure they allow short term rentals. Do these generally have good cash flows?

@Edreco Amos

Sorry for the late response! Airbnb properties can be hit or miss depending on location, seasonality, and regulations. Miami has strong demand for short-term rentals, but make sure to check HOA rules and city regulations since some areas have restrictions. Cash flow can be great if you manage it well and keep occupancy rates high, but factor in the added costs of management, cleaning, and potential vacancy dips.

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All Forum Posts by: Dominic Mazzarella

Dominic Mazzarella has started 7 posts and replied 221 times.

Post: 1031x and seller repair credit

Post: 1031x and seller repair credit

Post: HOA/condo INSURANCE NEEDED

Post: How Do I Structure My First Deal

Post: Wanting to learn about mobile home investing -- currently own 5 parcels of land

Post: What repairs can you leave until after listing but before showing?

Post: Is This Plan Financially Feasible? Northeast Multi-Family, then Move South?

Post: Property Management Insurance

Post: Should we sell our house or is it worth renting out

Post: Looking to get my first long term rental property | How is Miami's market?