All Forum Posts by: Igor Messano

@Brandon Sturgill you are correct this is considered a condo with a master policy as well. I was just sent the insurance info that outlines what is covered but will have to get the bylaws from the association. The contractor said trusses but I believe he meant the joists as it is between my unit the the 1st floor unit. 

Any experience dealing with structural issues and condo associations?

Hi everyone,

I have a unit that is in a 2 unit building of which each unit has an owner. The outside of the building is under an association but the inside is fully owned by the 2 owners (I am one of them). I have the top unit which we remodeled the kitchen 3 years ago. When we remodeled we decided to put down tile flooring in the kitchen, living room, and hall way area (open floor plan). We noticed that a section of house the floors were not leveled but instead of tearing everything apart the sub contractor just compensated and leveled as he tiled.

Fast forward to today we get a call from the down stairs owner that they were having cracks in the ceiling and once they removed to repair they noticed that 2-3 trusses were failing at the connection point. Our concern is that the sub was not licensed and that somehow our remodel will be blamed for what is a structural issue. The tile floors added weight compared to the old vinyl floors but I don't see how the weight of tiles aren't an expectation when building. The building is about 35 years old.

Any suggestions on how to best proceed here to ensure we aren't left holding the bill for this? In our mind this will likely not be recoverable from the builder or association but hopefully a shared cost between both home owners insurance.

I am not familiar with vacation rentals but from a multi-family rental standpoint, occupancy is only one data point in the income calculation and nothing more. What occupancy does tell you however, is how efficiently you are renting your asset. Price vs occupancy is just the same as supply and demand. If demand is high, you change pricing to meet and capitalize on the market. In my area I've always heard that for apartment buildings 85% Occupancy is the sweet spot that you are well priced.

This year I am looking into moving into commercial sized multi families (5+ units) and just so happens that an interesting property went up for sale around the corner from my primary residence. The property is a 4-unit which was converted from a very large SFH. The seller has acquired the zoning variance to legally have a multi unit, However the setup of the units is still very inefficient and could potentially be leveraged into 5 units with some rehab.

One advantage that this property has for me financially is that I can buy it as an owner occupied and pay little down payment. However, are there any issues with zoning when increasing the # of units from 4 to 5 since 5 is officially commercial?

Very general personal information such as, employment and salary, personal information for credit report checking, assets and other income. Similar to a credit card application. For both I didn’t have to provide anything besides my personal info. No backup for income or assets.

I don't know much about them or about owning a home with one in it. What I can tell you is that I've removed or helped remove two of these thanks with very little issue. All that was used was a drill and a reciprocating saw with a couple of blades. We made a couple of holes at the bottom to drain any left over oil from the tank into 5 gallon buckets, although in both there was barely a gallon left. Then just cut the thing into pieces with the saw to get rid of it. Depending on your local you might need to put the scrap in a pick-up truck and drive it to the dump yourself.

You might also want to put down several tarps as this can be messy.

Sorry to slightly hijack the topic but does anyone here have any ideas on how to prevent something like this from happening? I have never used a property manager but is the practice always that they keep tenant deposits in their own accounts? Is there anyway to restrict the access PM's have from accessing the funds without your authorization?

I disagree with @Jim Goebel. I currently have 2 lines of credit that are unsecured from my local credit unions. One for 30k and the other for 15k. The 30k line was established with the credit union I do my personal banking with and it took about 20 minutes to apply and get accepted. The other I applied and by the next day it was approved.

I was surprised when I first started getting these because it just looks too good to be true. I will say that when they pull your credit report they will be concerned if they see several lines of credit opened recently. The second credit union tried giving me only 5k initially and when I asked why they told me it was because of the other recently opened like of 30k. I explained that I meant to use these to do repairs in a rental as I wait for the refinance and they said "ok" and approved. Credit unions and small banks are very relationship driven and will work with you.

I have since used both lines and some personal savings to buy properties in cash and refinance them. Note that most refinancing inside 6 months only allows you to get the original purchase price out plus closing costs. You will likely not be able to refinance rehab costs within 6 months. So make sure you have the reserves to pay the credit line's minimum payment for the time required.

Quick hack - Some credit unions will tell you their maximum unsecured credit line is 10-20k. But sometimes this is a limit per "account" since you usually have to open a checking account. I've seen people simply open 2 accounts and get approved for 2 credit lines for the maximum.

The interest rates are around 9% on both lines.

Good luck.

Christopher Smith Just asked my colleague who is a tax expert and he shares your same opinion that it does not sound like a pass through “registered” entity is needed as a sole proprietorship is sufficient. The concern seems to hover around the actual nature of the business as certain service industries do not qualify. I did also find a time article that describes the same in a more detailed manner for whoever is interested. Christopher, I am guessing 2019 tax season will be a great time for you. http://newsfeed.time.com/2012/10/10/philadelphians-wear-more-sweatpants-than-anybody-says-study/

Originally posted by @Christopher Smith:

Originally posted by @Igor Messano:

Originally posted by @Christopher Smith:

I can't assess your individual situation, but I own a number of CA rental properties and a few out of state. I don't utilize legal entities of any kind and at least for me there is no reason to utilize them. 

My regular day job is very low risk (i.e., I'm not manufacturing dynamite in my garage), so my overall liability risks are low. As such, standard landlord insurance on each rental property with an overall umbrella policy is far more than adequate coverage.

In my opinion, people have gone absolutely overboard in setting up legal entities like LLCs, and I think they have done this primarily out of fear, ignorance and vanity. I save probably 10k a year (and a whole lot of paperwork headaches) by NOT using legal entities, and all with NO meaningful level of additional risk.

However, one thing to consider going forward is to meet with your CPA and do some tax planning. As part of the new tax plan effective this year, pass through entities (i.e., LLC's) receive a 20% deduction on their taxable income simply for being a pass through entity. This can mean huge tax savings depending on the level of rental income you have. If the additional savings outweighs the cost of operating an LLC, why wouldn't you do it? Just food for thought.

You don't need a legal entity to benefit from the new law change you reference, owning in your own name will be sufficient (i.e., owning in your own name is in end effect a pass through). Now whether passive rental real estate activities will qualify for the new provision is still unclear.

I'll be interested to find out for sure after I speak to my accountant but I am almost 100% positive this is not correct. The new regulation specifically calls out the need of use of a pass through entity for the 20% AGI savings so I don't see how not using one would get you the benefit. You are right that the end result of a pass through is regular personal income, but the regulation isn't a tax credit on regular income, it's on the LLC income prior to hitting your personal AGI. I will know for sure soon when I meet with the CPA.