All Forum Posts by: Eric Zdanowski

@Michael Plaks Is there specific language in any of the regs that led you to that conclusion?

Let's assume that we are in a agreement that you can apply the de minimis safe harbor to costs incurred prior to the placed in service date. My thought would be that any work done prior to the placed in service date that is expensed under the de minimis safe harbor would be considered a Sec. 195 Start Up Cost and amortized over 15 years (after the $5000 start up cost deduction limit).

There seems to be some conflicting information out there regarding whether or not Sec.195 applies to rental businesses. Articles like this claim it does, as do other fairly well known CPAs here on BP. I've also seen the same counter argument that @Ashish Acharya brought up many times, in that the special start-up expense rules only apply to active businesses.

Is there a general consensus on this? Is there an argument to be made for those that qualify as active investors or real estate professionals?

@Linda Weygant perhaps today is the day to have that debate? Where do you stand on taking de minimis elections on assets not yet placed in service?

@Ashish Acharya, @Michael Plaks seems like you are in the "yes" camp. I'd be interested in hearing a counterargument. 

@Brandon Hall any thoughts on this?

Switching things up a bit this time I see. Excited for this one though. See everyone there!

Thanks for the responses everyone. I will take that as a unanimous yes it would be an unwise move then.

@Michael Le The MLS does have properties priced for less yes, but there are two caveats. (1) Most are not currently being rented and/or are vacant. This places an extra amount of risk on these deals because the window for renting to students is very small, making it much harder to find tenants after the school year has started. (2) The town passed an ordinance limiting unrelated tenants to just 3 per household, which obviously has a huge negative effect on income potential. Properties that were registered as rentals before this law passed (such as this deal in question) are grandfathered.

The fact that this property is currently fully rented and exempt from that restrictive ordinance makes it more valuable from an investment standpoint. This is why I didn't immediately scoff at his asking price.

So I'm currently analyzing an off-market lead and need help pinning down a fair market value to determine what I can offer. 

Backround: This property is a SFH, but due to it being in a college town and consistently rented by students, it commands much higher than market rents ($2500/mo). Now, the seller is a sophisticated investor and works as a commercial loan officer, so he based his asking price ($225,000) off of the income approach using an 8 Cap. When I ran a CMA, however, comps put this property in the $180k-190K range. The thing is, even when I run the numbers at his AP, the deal more than meets my minimum ROI and Cash Flow criteria. My concern is that since this technically is a residential home, it would appear as though I am overpaying based on comparable sales. My worry is that this takes away my margin of safety and can affect my ability to finance/refinance.

So my question is: Is it unwise to pay more than comps would suggest, even if the rental income can justify the higher price?

Saw this just in time. I’ll be there

Really good discussions being had at the last one. You guys are bringing in some great speakers. Can’t wait for July’s meeting!

Glad to see you finally posting on the forums!

Great advice from @Paul Timmins on how to get started exploring some of the best things this community has to offer.

And I'm happy you can finally make it to the Manchester meet up tonight! @Jacob Reilly and @Phelim Lennon we look forward to seeing you there tonight.

Hey Phelim welcome to the forums!

Your strategy and goals sound tremendously similar to my own so it would be great to connect at some point. Currently I’m working on putting everything in place to owner occupy a multi myself and it’s always great to talk to people that have done the same. 

I’m also a bit of a market research data geek and Black Rock has always been on my radar but not an area I’ve had a chance to delve deeply into yet. But I notice your tag says your from West Hartford is that true? That’s definitely a market thats been heating up over the past few years.