All Forum Posts by: Elena S.

If your goal is cash flow to retire early, would you buy an 11% Cap rate deal with current interest rates? (C-class neighborhood and property)

@Ashish Acharya Thanks for your response! This is only my second month of operating the STR. First month was break-even, this month looks better but now I may have a $4,000 CapEx expense I didn't account for, so very hard to project what this year's income will be. I was hoping for $100k - $120k gross but so far doesn't look like it.

I purchased a short-term rental this year and I am self-managing, so I qualify for active participation based on the 500 hour requirement. I am considering doing a cost segregation study, but after looking at all the costs, I think it may not be worth it. Could you please help me with the math: 

Purchase price: $835,000

Land value: approximately $125,000

Proposed $141,000 in bonus depreciation in 2022

2022 - 2027 accelerated tax depreciation of $200,000

AGI: $105,000 last year

Federal tax paid: approximately $9,300. That puts me into 24% Federal tax bracket married filing jointly.

Fee for cost segregation: $3,000

CPA fee EVERY YEAR: $1,900. Right now I'm doing my own taxes with TurboTax and happy with the result so far.

The plan for the property is to hold forever.

Thank you for your help!

@Davido Davido

Thank you for the suggestion, but unfortunately the liens are court-ordered judgements. Some of them are more than 15 years old, but the creditors filed for an extension, so all of them are still in effect.

@Bill B.

Mortgage is $80k, Seller's liens are $14k plus wife's liens $12.6k at 12% interest since 2006 - 2009. The interest is still accruing. Plus as you had mentioned Seller's closing costs. 

@Tom Gimer @Peter Walther

I am having a hard time communicating with the closing attorney who's handling the title. I'm not able to get him to email me back or return a phone call. My Realtor basically told me to sign the release and get out of the contract, but I have until Dec, 31, so I'm going to see if I can still get it solved somehow. I don't think I'll be able to get title insurance with all the liens still on title.

@Tom Gimer

I'm not sure how the title of the property was held prior to her passing. The liens relating to the wife are judgement liens with collections companies at 12% interest since 2006-2009. I believe the husband and wife were continuously married until her death. You are correct that the wife's liens are not affected by the husband's bankruptcy, which is unfortunate for me, because it's holding up the sale of the property.

@Peter Walther

Before I went under contract, my Realtor told me that the sale will need to be approved by the court. We got the approval two months later. My guess is that Ch 13 plan included the sale of the property. The liens on the title are judgement liens with collections companies represented by attorneys. The attorneys are not responding to our requests to negotiate the amounts.

Hello, I am under contract to purchase a triplex in Kentucky. The Seller has declared Chapter 13 bankruptcy and the property has 24 liens on the title. Most of the liens were addressed in the bankruptcy filing and the court allowed the sale to go through. However, there are 5 liens on the property that belong to the Seller’s wife. She passed away in 2017. The amount of the liens is more than the appraised value of the property (it appraised for $106,000). The Seller is thinking about letting it go into foreclosure. I still want the property, because the numbers look good:

Purchase price: $105,000

Total rental income: $2,100

Cost to make rent-ready: $40,000.

Taxes are 1.5% of purchase price, insurance is about $120/month, utilities are separated.

C+ neighborhood, inspection came back good, no unexpected issues.

I am trying to get in touch with the lien holders to negotiate with them directly. If the property goes into foreclosure, they get nothing, correct? There’s an $80,000 mortgage on the property. Wife’s liens add up to $12,600, plus there are 19 more liens that were addressed in the bankruptcy filing. 

Has anyone ever dealt with something like this? What is your advice? I don’t mind coming up in price a little bit if it means getting the deal. 
Another option I’m considering is instead of getting a loan, pay the Seller a little bit of cash to move out and take the property without clear title. Is it too risky? Can the creditors foreclose on me?

My goal for this property is buy and hold for at least 30 years for cash flow.

Thank you so much for your advice!

@Susan Tan Congratulations on your investment property! Could you please share the name of your property manager?