All Forum Posts by: Mel K.

Hello BP!

For those of you who hold property in a Land Trust, how exactly is income reported and subsequently taxed?  If it is a rental property producing rental income, would the Trustee and Beneficiary receive K-1s? Say the Trustee manages the property and collects a fee for those services.  The Beneficiary gets the net income after expenses are deducted. Or does the Trustee file a 1099 form and provide that to the Beneficiary as they are providing a service? 

Are there any accountants on BP familiar with taxation and Land Trusts? Thanks in advance!

Hi Everyone!

I'm looking for some advise on how to approach a particular situation please. We are trying to rent a recently vacated unit.  There is a couple that passed the initial phone screening and thus led to a property showing.  At the end of the showing when we were discussing the application process that includes a background check, they mentioned having felonies for theft. One felony was as recent as 2016.  Now during the phone screening call, they only mentioned that they had some minor infractions with the law that we assumed were misdemeanors. My wife and I are not typically comfortable renting to felons, but we also believe people can change their lives around.  This couple claimed these mistakes were when they were "young and dumb".  We then Googled their arrests and noticed there was prison time associated.

This couple claims to have the funds and have provided references. Based off of the new HUD policies, we can not discriminate based off of felonies. Do we just have them proceed with the application process? Perhaps there is more information that we need to assess? Or do we just save them the application fee and try to turn them down now?

I'm just curious what others have done if confronting similar situations.

Thanks.

Thank you all for your input!

Hey BP! I'm looking for some advice on a matter.

I am in the due diligence phase of a duplex I am in contract with. My plan with this property is a BRRR. I am purchasing this property with cash, but intend on refinancing in a year or so. Would getting an appraisal be recommended at this point? I am getting inspections done, but would the appraisal be worthwhile? When I refinance, I am sure the bank will order their own appraisal at that time. My realtor just suggested getting an appraisal for me to have an idea of how much I can potentially get refinanced in the future. I am aware common LTV is 75%. Do most people following the BRRR formula get appraisals at this point if purchasing in cash? Thanks in advance!

Hello,

I was hoping to get a recommendation on how to proceed with refinancing a property that is in a Land Trust. The trustee and beneficiary are two different LLC's owned by two different people. Are there lenders that lend to the LLC or would we need to have an individual be a personal guarantor?

Is there anyone in the lending business that can be recommended for this situation?

@Joseph Palladini There are a lot of variables that will need to be considered. Since this seems like an investment property for the seller, why is he selling it? Is he/she underwater with the mortgage? Are their structural or hidden problems with the property he/she has not disclosed? Or maybe they are just tired of being a landlord? 

I don't see where you would be getting the $400 in cash flow. What about cost of insurance? That may end up costing you as much as you pay for taxes. For a home built in 1970, you may be under-estimating monthly repair costs. I would bump it up to at least $120. Same thing with vacancy...bump up to $120. I typically keep my vacancy and repair estimates at 10% of monthly rental income. I would only change these items if I know the area does not see much vacancies or if I replaced everything breakable at the initial renovation phase. Some may feel my numbers are highly conservative, but I'd rather not be cash flow negative at the end of the day.

When does the lease for the current tenants end? Make sure you get a copy of the lease to ensure that the lease can be transferred to you after the sale (assuming you proceed with the deal).

I hope I'm not bursting your enthusiasm, but unless you can get a better purchase price for this one, walk away. Keep up the hunt regardless.

@Mario F. I'm not familiar with the LA market, but I do know that it is not worth purchasing that condo in LA unless you think you can cashflow with it as an investment property after you move out. Condo's tend to have high HOA fees that really sap away any profit you may have. So make sure the numbers are in your favor.

If you are serious about investing out of town, would you consider moving there to manage the properties yourself? Or would you hire a PM?

@KC Wood LWR is a great area to raise a family. I definitely love it here! Regarding the multifamily deal, I found it with the help of a realtor who I connected with through BP. 

@Account Closed Thank you for the kind words! Although I'm not actively looking for deals right now, I am still immersing myself in REI through books and research on BP.

@Gabriel H. Congrats on the new purchase! Awesome CF! Might I ask who your lender is? Local Texas lender or a larger national lender?

@William LoPresti welcome to Sarasota! Glad to hear you are venturing into REI. Manatee and Sarasota counties are great areas to work and live.

Regarding my REI journey, I was able to successfully purchase my first multi-family property last summer. I am very pleased with the purchase as the property is exceeding my goals for cashflow. I have to credit my success to the help and knowledge I received through BP. I currently have put a pause on any new acquisitions as I have other business and personal goals this year. I hope to start back up as soon as I can.

My best advise for you is to consume as much information as you can through this website. Feel free to ask questions as there is always someone who knows more than you or I. Good luck with all and please let me know if I can be of help.

Mel