All Forum Posts by: Evelyn Randolph

Hello, BP Community!

I reached agreement with a seller to buy their 12 unit building at a very good price, but the property is located in an area where I'm required to have windstorm insurance because it's location close to the Gulf. I can get coverage through Texas Windstorm Insurance Association (TWIA), but they would not insure without a new roof that meets their standards. The bank I'm getting the loan from requires insurance to be in place prior to closing.

Because I'm buying at such a good price, the seller will not pay for the roof. I have the funds to pay for the roof replacement, and I would pay for it ahead of the actual purchase, but hate loosing on the tax depreciation on installing a new roof since I'll be paying for something I don't own.

Are there any strategies I could use to still claim the depreciation, or any way that the transaction could be structured such that I don't lose on that tax benefit?

@Nathan G. Totally agree! What about the applicant making 4000/month trying to rent a $725 unit thst I dealt with a few weeks back? Rent is definitely greater than 3x the monthly rent, but he has three kids with three different women, paying $1600 in child support total and a $800 truck note. You have to get personal and get in their business to really understand their financial picture, else you're potentially stepping in to a lot of trouble.

@Michael Plaks I pay my contractors via Venmo. Is that similar to your reference to PayPal, i.e., is an electronic form if payment that issues 1099's?

Also, in the past I've seen an interpretation that landlords that report rental income via Schedule E were not required to file 1099s. What's your take on that interpretation?

Property insurance in Houston and any city in the Gulf Coast will be higher than other parts of the country because of the storm coverage required, and only offered through Texas Winsdtorm Insurance association, so it's difficult  to compare any policy to coverage outside this area.   And it has been my experience that it gets crazier with anything larger than  2 units, so you have to project that into your analysis as you continue to buy.  I personally have been trying to avoid areas in the TWIA zip codes.  But like others have said, shop around.  I use Sean Mertz Allstate (ask for Ben Collins) and Spearhead Insurance for single family homes, NREIG for small multifamily. 

Is it still available? 

@nicholas aiola

The extent of my real estate income is limited right now to buy and hold rental income, reported as passive income on Schedule E.  I was reviewing a BP discussion this morning that confused me with regards to the need to issue 1099-MISC forms to independent contractors receiving more than $600 for work completed. Because the limited extent of my real estate activities, I have relied on Turbo Tax to do my taxes in the last 2 years,  and their position is that you do not have to issue a 1099 for investment rentals. 

This is the answer to the question that's consistently provided by Turbo Tax: 

"If you own a rental,  you do not have to send form 1099-MISC to your contractor.   The rules requiring it were not to be implemented until 2012 for payments made during 2012.  They were repealed by HR 4.  The President (Obama) sighed the repeal bill on April 14, 2011.  In doing so,  the requirement for rental property owners to issue Form 1099-MISC no longer exist for any year.  The exception may not apply to postings made for attorney frees,  which would still require Forms 1099. 

 Additional information:

Those rules were repealed under H.R. 4 (P.L. 112-9) and made retroactive, as if they had never been enacted. Therefore, landlords, in the ordinary situation of renting out a house or two, do not have to issue 1099s to service providers. 

There are still situations where a Schedule E filer would have to issue 1099s. In general, you would have to file 1099s if you materially participate (nonpassive) in the activity. For example, if you are a real estate professional and treat the rental activities as nonpassive, you are in a trade or business and you must issue 1099s. Congress.gov https://www.congress.gov/bill/112th-congress/house-bill/4

Is this information outdated,  and have there been any changes to require the issuance of the 1099's for people in my situation? 

Can you elaborate on typical terms?  Also, in which states you lend? 

@Nick R.

Look into what they believe your tax bill would be also. Had that happen on my primary residence once because the mortgage company overestimated my tax bill by ignoring the reduction allowed by the homestead exemption, which would apply because this is your primary home. It all got readjusted once I gave them documentation of what my prior tax bill was.  

@Cliff Odom

I like your term of investor grade mortgage broker. You refer to someone you have been able to successfully do business with. I live in North Houston and have not been successful yet at finding lenders that do not try fit every scenario in the same mold.  Would you mind sharing the name of your broker with me? Thanks!