All Forum Posts by: Jan Kerr

@David Adamolekun There are a ton of Hard Money Lenders out there. They may all have similar policies, but they are all actually very different in what they will or will not do. Their rates and lending criteria are very personal to them and where they will lend is based on where they are licensed to lend. If you would like, I can send you a Hard Money Lender Profile Sheet that will help you create a profile on every lender you find so you will know at a glance what they will or will not do and what they want from you as a borrower. I have found lots of lenders who have lower lending threshholds in my searches. 

@Lori Greene Hi Lori, Yes, my accountant did specialize in Real Estate and all things tax related. He's trying to retire now. I'm going to miss him. I've been using him since I bought my frist house in 1992. HIs son is taking over his business, but he's not the same.

@Nicole Parnell Hi Nicole, I see your dilema. We have all had to deal with that question of holding a property longer to be able to take the long term capital gain at 15%  vs the short term capital gain at 23%. But I think there is some confusion in your question.  

There is an IRS Rule that allows you to take the primary residential deduction of up to $250,000 if you are single and up to $500,000 if you are married on any gain earned from appreciation of your primary residence. The requirement is that you must have lived in the house for 2 years out of the last 5 years. 

For an investor who does not live in the house, that is not even an option, but holding a property 1 year and 1 day qualifies for long term capital gains. If you stay exactly one year or less, then you are into the short term capital gain. However, you can reduce the gain on the taxable amount by offsetting the gain by documenting and proof of any capital improvements you put into the proeprty. The capital improvements will be decusted from the gain amount and you will only be taxed on the difference. 

Capital improvements are major improvements that increas a homes' value, not just repairs or minor upgrades. 

To answer your question, If you have stayed over one year, you are already into long term gain. if it is less than one year, how much will you pay in taxes on the gain at 23% and how much will you pay in taxes on the gain at 15%. What is the difference. Can you deduct any capital improvements? Once you know those numbers, you can decide it it is worth it to pay the higher taxes to take your cash now, or if it is worth it for you to forget the cash out for now and stay another year to take the full deduction and not pay any taxes on the gain. 

FYI -I am not an accountant, but this is my understanding based on my own accountant's advice. Please verify with your own accountant before taking any action so you know for sure. I hope this has helped. Good luck to you!

@Randi Shannon In a JV Agreement, you can put in any terms you want. The JV Agreement should define each of your roles and responsibilities in the deal in detail. Who is doing what and any other contributions whether they are financial or physical or managerial. There should be specific remedies spelled out if either party fails to live up to their responsibilities and obligations under this arrangement. It should also define your compensation.

I would like to know if the comps were done on both the as is value and the after  repair value separately.

 What will the rehab entail and what level of quality will be used in the materials and workmanship? If you do this deal, make sure to have an inspection done and itemize the repair costs and budget, breaking down the materials and labor separately for your protection. Insist on 3 competitive bids for the work and use a really thorough contractor agreement with every contractor who does any work , They should be licensed and insured. Make sure any work that requires a permit has a permit. 

 

@Randi Shannon Randy, you were smart to do your research and take it slow rather than letting his timing pressure you into taking action. When people hear that you have come into money some of them will start sceeming on how to get you to share it with them. I would start by getting your own comps on the house from your choice of a local agent or a dis-interested third party so you know ther numbers have not been manipulated. If you don't have an agent or don't know how to get that done, let me know and I'll walk you through it. Get comps for its "As Is Value" and then again for its "After Repair Value". Then if you are satisfied that the After Repair Value is high enough, then get your own Home Inspection done from a licensed Home Inspector. that is not the city building inspector, but a professional home inspector. It should cost you about $150-200.  You decide which inspector to use. Do not let the investor or his attorney recommend anyone to you. Once you have an inspection and we know what needs to be done to the house, we can put some numbers into it and tell you for sure whether there is a good deal there or not. Good luck and let us know how it goes! Please chack out my profile. I would be happy to connect with you!

@Karen Dixon Hi Karen, I laughed when you said yout weakness is being blunt. I alwasy had the same problem, but over the years I have learned to let words be my friend and I have discovered that you can be direct as long as you learn the art of being tactful. That way you can say just about anything to anybody and they won't take offense.

@Lori Greene My passion in real estate started for me at age 7 or 8. I have a deep appreciation for the architucture and wood craftsmanship of old houses. I think I was 8 when I asked my grandmother if she would leave me their house. She laughed and said that her sons would get it. That was cool, my dad was one of her sons. LOL! I studied drafting in high school, went right into architectural technology in college and then spent 10 years in the decorating business on the retail end of things. It was during my time in the decorating business that I began investing. My entrepreneurial spirit started very early and never left me. Working for someone else was never my style. I knew I was capable of taking better care of myself and my financil needs than any employer ever could be for me.

@Lori Greene When I started I was young, about 25 years old. All I had were my own drive and determination and the logic and common sense I had developed growing up and one real estate agent. I knew what I wanted and I put my agent through two years of looking and making offers until I got my first offer accepted. I was grateful for her tremendous patience and I'm sure that she was glad to be done once I got that first one. It was a house hack. I

didn't see it as a challenge or even get frustrated over the time it took. I am not easily discouraged. It was that persistence and determination that served me so well. I did not even consider the possibility of failure becasue I knew I could do it. Pateince is key UInderstand that there is a learning curve and persistence will get you there. 

I've been at this now for 29 years if you count those first two years of my search for the first one and I am still learning. I love every minute of it. Investing is part of my make-up of who I am. I am passionate about it and I fee the same thrill now when I get a deal as I did back then. It is not, nor has it ever been a job to me.

I hired my first professional mentor four years later. I paid $1,100 to work with him. That was a lot of money back in 1994. It was the best investment I ever made. He later invited me to become a mentor. 

@Byron Bailey @Will Fraser's numbers and advice sounds correct to me. If the property is paying all of its own bills and creating a positive cash flow, even a small one, that is a good thing! 

I would buy a home warranty on it now in order to begin coverage now that can be renewed year after year, so that when you move out and it does become a formal rental, long or short term, you'll have coverage for all the house's systems and appliances being used by your tenants. Even new properties, though usually don't need repairs early on, things are not built like they used to be and we cannot afford to make the assumption that new means high quality or long term durability. 

Something many people do not know is that you can qualify as a first time buyer if you have not had a property in your name for the prior three years.  

@Matthew King Hi Matthew, Lori Greene is giving you some good advice, and I want to add to that. 

First of all, I would make the security deposit a different number than one month's rent. People will confuse it with their last month's rent and may tell you to apply it that way which would leave you with nothing to pay for repairs and any damage caused when she and her three children move out. Make the security deposit a different number even if by just a few dollars so it is not to be confused with last month's rent. Have her fill out a formal application which gives you all the informaiton you need to conduct your background screening processes, including the contact information of all of her previous landlord references. It is best to talk to the older landlords first vs the one she is leaving now. The previous landlords will be honest with you about her payment history, why she left and the condition in which she left their property. The current landlord may not know what condition the unit is in until after she leaves, and could possibly give you misleading information in an effort to get rid of a problem tenant, although she sounds like she may be a very good tenant, you still want to verify. Ask previous landlords if they had to decuct anything from her security deposit when she left and what it was for. Also ask them if they would rent to her again. Ask the current landlord if he has been inside her units since she moved in and if so how long ago was it? How did the unit look? Does she pay on time? Have there been any disturbances that required any sort of intervention? Does the current landlord have a security deposit of hers in his possession? 

Also in addition to the credit check and employment verification, you should check for a criminal history and prior evictions. Don't assume anything. 

Stipulate in the lease or rental agreement that she is not to sub-lease or allow anyone other than her three children to move in or occupy the unit without your prior written approval and a thorough screening of the prospective additional tenant. I also add a cluase allowing for inspections of the unit every six months for general repair and maintenance purposes. Also, tenants are not allowed to make alterations or changes to the unit if those changes are permanently affixed in any way, which included paint, window coverings, fixtures, floor coverings, etc. Do a walk through of the unit with the tenant, having the tenent make written notes of any existing damage, dents, dings, stains, cracks, ect so you both know what condition the unit is in upon her taking possession. That will make it easier for you to compare when she moves out and document the additional damage, without blaming her for something she did not cause. 

I hope this helps. I agree that she sounds like she will be a good tenant, but do not make assumptions. Put a tenant screening policy formally into place with a written policy and then follow it to the letter, without exception.