All Forum Posts by: Charity Phillips

Thank you guys, you all are quite helpful!  We have followed along the BP podcast for almost a year now but joining the forum we are so happy to receive such an amount of feedback!  

@Robert Leonard Thank you for your help once again!  

Hi all, 

4 months ago my husband and I bought our first home & rental home together in Lafayette, Louisiana. The home we stumbled upon is in a great area and was a 1br/1ba at 1670 sq ft. It was built for a widowed grandmother only, however it came with a decked attic space of 600 sq ft. The home also had a guest house on the property, very nice and slightly away from the main house, that was used as a rental, fetching $700/mth. Due to the unconventional layouts of the house, being 1br/ba, and having a guest house, comps were very hard to find, and the home appraised lower than we were actually willing to pay. The sellers lowered the price to match the appraisal, and we bought the home. We have since had renovation crews in to add 2br/1ba in the attic, which our anticipated appraisal after construction came back very favorable to the investment, due to it improving it's functionality and improving it's comparables zone. We currently rent the guest house to my husband's best friend, a youth pastor, for the best friend rate of $550/mth. He does so much around the property and we trust him with everything so it's well worth the discount. Anywho, I just wanted to give the backdrop to our steps into real estate and rental income. We have learned so much from the process of buying this home and rental & selling my parents' home FSBO that we are obviously interested in pursuing other real estate rental opportunities as they come.

My question lies in the reporting of the income from the guest house rental in efforts to maximize our loan potential for future buying power.  I understand that we would want to show a history of rental income on our tax returns in order for that money to count toward a loan.  In that it is a guest house and part of the one home purchase and mortgage, how should we report this?  Create a separate entity and is it possible to allocate the guest home value to that entity, then track income/expense?  

What are the best ways that you guys have found for tax management in a married couple to record rental income/expense? S Corp, LLC, etc.? Do you have any experience with a guest house rental attached to the property that you are currently LIVING in?

Thanks for any feedback!

Charity

Hi all,

We are currently deep in the process of buying our first home in Louisiana. It is a 1br/1br home built for a grandmother with 1660 sq ft, has an additional 1br/1ba Rental home on the property, and sitting on 1 acre of land. A golf course is being constructed a quarter mile away. The home has electricity and plumbing in a 600 sq ft. unfinished attic which we intend to convert to more bedroom and bathroom areas. We know the seller is very motivated, as she is selling this home (her mother's) and her home next door and moving away. Listing price was 205K, we agreed to a purchase agreement at 185k. Our appraisal came back at 170K, citing "Fair" functional utility because it is a 1 br/1ba & a recent foreclosure on a comp home lowered the appraisal value. We wrote the seller a letter about the appraisal challenges (bank not lending above appraisal, and that other buyers would have the same hangups) and they accepted our offer at appraisal price of 170K. We just got word from our lender that the underwriters have denied the appraisal due to functional utility being "Fair" instead of normal, "No good usable comps-distance of 3 miles or greater are not acceptable. No comp has a guest house- only work shops or none at all to compare." It is a cute, quirky home on an acre in a very desirable and developing part of town. We already have a renter for the rental unit that will cover most of our mortgage to begin with. My father is a contractor and would help us finish the work required to bring the home to Normal functional utility. We feel the price we are getting with the work we can put in to increase its value is a deal; however we are hung on the bank now. We have used a 1 year tax return conventional loan underwriting because my husband's business generated far more income in 2014 than in 2013. However this limits the amount of lenders we have options to. Any advice on how to close this deal?  

Hi all, 

We are currently deep in the process of buying our first home in Louisiana.  It is a 1br/1br home built for a grandmother with 1660 sq ft, has an additional 1br/1ba  Rental home on the property, and sitting on 1 acre of land.  A golf course is being constructed a quarter mile away. The home has electricity and plumbing in a 600 sq ft. unfinished attic which we intend to convert to more bedroom and bathroom areas.  We know the seller is very motivated, as she is selling this home (her mother's) and her home next door and moving away.  Listing price was 205K, we agreed to a purchase agreement at 185k.  Our appraisal came back at 170K, citing "Fair" functional utility because it is a 1 br/1ba & a recent foreclosure on a comp home lowered the appraisal value.  We wrote the seller a letter about the appraisal challenges (bank not lending above appraisal, and that other buyers would have the same hangups) and they accepted our offer at appraisal price of 170K.  We just got word from our lender that the underwriters have denied the appraisal due to functional utility being "Fair" instead of normal, "No good usable comps-distance of 3 miles or greater are not acceptable.  No comp has a guest house- only work shops or none at all to compare."  It is a cute, quirky home on an acre in a very desirable and developing part of town.  We already have a renter for the rental unit that will cover most of our mortgage to begin with.  My father is a contractor and would help us finish the work required to bring the home to Normal functional utility.  We feel the price we are getting with the work we can put in to increase its value is a deal; however we are hung on the bank now.  We have used a 1 year tax return conventional loan underwriting because my husband's business generated far more income in 2014 than in 2013.  However this limits the amount of lenders we have options to.  Any advice on how to close this deal?