All Forum Posts by: Zeb B.

We were able to find a receipt from the city for "main hookup" where the prior owner paid separate line items for both both the water and sewer. Receipt is from 2002, so the house has been connected since that time. 

It's amazing to me what the neighbor thinks he can get away with, and how poorly the city has responded to the situation.

We will start looking for an attorney. Hopefully a letter from a law firm will get them to change their attitude pretty quickly.

I have a friend who bought a property in a small town in Eastern Washington. It is an existing home which has been connected to city water and sewer since it was built about 25 years ago. His existing sewer lateral apparently runs under his neighbor's lot, to a manhole located in the neighbor's backyard, where both his and the neighbor's sewer laterals connect to another line that runs to the sewer main under the street. His neighbor decided that he doesn't want my friend's sewer line running under his yard, so the neighbor dug up the sewer lateral, cut and capped the sewer near the property line. I believe the neighbor has some beef with the city, and is trying to use this issue to create a problem for the city, my friend is just the unlucky guy who gets to be collateral damage.

The small town utility department doesn't have record drawings of the laterals, and they are not being too helpful. The prior owner that my friend bought the house from had been using city water and sewer (and paying water/sewer bills) for 25 years. The city set up a water/sewer account for my friend, but now that this situation came up, they told him they won't be billing him for the sewer charges.

If we can't get the situation rectified talking to the city utility department, where do we turn to next? Real estate attorney? State health department? 

Would the existing 25 year old sewer lateral qualify for a prescriptive easement if there is no recorded easement found? What agency would make that determination? What recourse do we have against the neighbor for taking matters into his own hands?

Not sure where to start untangling this mess...

Over the last 10 years I have acquired and leased out several single family houses and duplexes. I have never filed and insurance claim on any of them.

This spring, a delivery driver slipped and fell making a delivery at one of my properties. I exchanged contact information with his supervisor, who said the driver went to the ER, got and X-ray and did not need further treatment.

I just got a letter from the company's insurance carrier stating that I am liable for about $1500 in medical payments and requesting I either pay up or forward them my insurance company's contact information. Given the low dollar amount, I an wondering if it is better to pay out of pocket and not file a claim with my insurance company. (The motivation would be to avoid increasing my future insurance rates)

If I decide to pay out of pocket are there any pitfalls I need to avoid?

Is there any way to require the other insurance company to waive the ability to make future demands for the incident as a condition of paying the amount they are requesting?

For your Refi, you are showing a loan amount of about 100k, but your after repair value is 100k. What type of loan are you planning to get? Usually a conventional loan for a cash out refi on an investment property will be limited to 70% LTV

Scott, it sounds like you have a great opportunity to hang on to a good home with an awesome mortgage rate. You set yourself up well with your refi. With 30% equity the opportunity cost of keeping the house as a rental is not too high. If I have 50% or more equity in a house, I generally find the ROI to be on the low side and start to think about selling or financing to pull cash out.

The only thing I would recommend is to consider if there are repairs or maintenance items you can take care of now, so you don't have to work around a tenant's stuff later. 

One thing I do differently in my rentals compared to my residence is the flooring. In my house I use more carpet and hardwood/engineered hardwood. In a rental Luxury Vinyl Plank is a good option, it's cheap, durable and looks good. I would not rip out the existing flooring now unless there is something wrong with it, but as the flooring wears out, consider swapping out carpet for LVP in areas that it makes sense.

Bozeman, MT still licenses non owner occupied STR in all but R1 zoning, but I suspect that will change in the next few years. Getting a STR right outside city limits will probably continue to be an option for the foreseeable future.

I have a bit of experience with this type of situation.

In 2013 I had a single family house that I lived in for 2.5 years and then rented out for the next 2.5 years. Potential capital gains were about 250k so I decided to sell it. I had minimal depreciation recapture taxes to pay and my capital gains were tax free because of the primary residence capital gains tax exclusion. I used the proceeds to buy a new primary residence and two new rental properties.

I'm currently wrestling with a similar set of circumstances on a single family house that I lived in, renovated and added an ADU to. The mortgage rate is 3%, and because of the low mortgage rate and large amount of equity I have in the property, it is cash flowing about $3k/month. I recently moved out, so my 3 year clock to sell and take advantage of the primary residence capital gains exemption just started.

I think the "right" answer depends a lot on what your goals are and what you would do with the proceeds from the sale. 

If you are single, 250k of capital gains are exempt for taxation, if you are married it would be 500k. With a 15% or 20% long term capital gains tax rate, and a 500k exemption, selling within 3 years "saves" you $75,000-100,000 compared to selling farther out in the future.

If your plan is to own that property or a similar rental long term, then the transaction costs from selling that property and buying a similar would probably eat up most of the tax savings. You would also still have a tax bill for depreciation recapture and any gain above your exclusion amount (250k or 500k). 

However, if you do a 1031 exchange with just the right amount of "boot" I believe you could sell the property, pull out 250k or 500k in equity by buying a less expensive replacement property, and use the primary residence capital gain exclusion to avoid capital gains taxes on the 250k or 500k you pull out. However, you are still incurring transaction costs and locking in a much higher mortgage rate on the new property. Unless you have some other factors that make you want to exchange properties or you want to pull money out to use outside of real estate investing, I don't think it is worthwhile to sell the property just to take advantage of the capital gains exclusion.

If you want to pull money out of real estate investing and put it to use elsewhere (i.e. stock market investing or buying a new primary residence) then it probably makes sense to sell while you can take advantage of the capital gains tax exclusion.

If you are going to keep the money in real estate it probably makes sense to hang on to what sounds like a great property and keep the low mortgage rate.

If you want to keep the money in real estate but don't want to own that particular property anymore, or if you would like to increase the leverage on your real estate portfolio, figure out what your tax bill would be from selling. If the tax bill from selling (capital gains in excess of the exclusion + depreciation recapture) is fairly high, consider a 1031 exchange.

You can only have 10 conventional mortgages in your name at one time. Some banks won't write another mortgage if you already have 4 in your name. 

Some of the requirements for qualifying change depending on how many mortgages you have already (You will be required to have more cash reserves to get your 10th mortgage than you need to qualify for your 3rd mortgage)

I have experience in the residential real estate market, but none in commercial real estate or small businesses. A friend of mine is looking to sell a gas station he owns in a small town in rural Oregon. We are trying to figure out an appropriate asking price. 

The building is less than 5 years old, 3 aisles, plus two walls of refrigerated drinks. There are 4 unleaded pumps and two diesel pumps. A small restaurant is attached to the gas station.  Total income and net income have both been increasing for the last few years. Gross Income last year was $2,160,000 with expenses (not including depreciation or interest) of $2 million for net income of $160,000. The owner does not put in any shifts at the store, just oversees a hired manager.

What kind of calculations would you do to come up with a value or asking price for this type of property?

I usually raise the rent every year even if it's only a nominal amount. Prices tend to go up over time for most things, not just rent. I send a short letter stating that I'm hoping they are planning to renew their lease, with the new rent amount. On normal years I include a generic statement that rent increases are necessary to keep up with rising property taxes, maintenance costs and inflation.

If you would have raised rent $60 last year and $90 this year, you would not be hitting them with a $150 increase all at once, and you would have collected $720 in extra rent last year. 

Renewal rates should be based on the market rent, but I usually set my renewal rates a bit below the market rent. Not many tenants are going to move out if you raise their rent from $1625 to $1775 and a similar new place is going to cost them $1850 or more.

In recent years with inflation and rent prices going up so much, I have raised rent on renewals more than people were used to. I had a tenant question a 10% rent increase. I responded referencing the current inflation rate increasing costs. I also sent them local listings showing that I was giving them a discount relative to the current market rates. They signed the renewal.

I would rather have slightly lower than market rates with less turnover / vacancy, but only to a point. If you don't consistently raise rents in this environment, you will be a few hundred dollars per month below market rates in a few years. Over time that will be thousands of dollars lost.