All Forum Posts by: Jeshua Patrick

@Dave DeMarinis I have been looking at properties in the Dayton area and I have seen rates as high as 6% of purchase price but most are in the 3-4% range.

@Michael Vu every piece of information you can plug into your analysis before making an offer or during due diligence is one less landmine that can trip you up after you close. The 1% rule or 50% rule or whatever you choose to use are like painting with a broad brush. They help you weed out a lot of properties quickly so you can focus more closely on the ones that are left. In some areas it probably doesn’t make sense to buy below 1.5% depending on the age/condition of the mechanicals and the structure. Another thing that can trip you up is property taxes. In some areas property taxes are simple and affordable while other areas, like Dayton, can be complex and expensive requiring close attention to avoid making a major mistake.

 It is possible to have positive cash-flowing properties but still show a loss on taxes. 

 I was speaking specifically to traditional mortgages that would be backed by Fannie Mae or Freddy Mac. As many of us know, there are many banks that like RE and think outside the box if you can show that the property is profitable.

@Bryen Blankenship not a tax pro or an attorney so no legal advice here. LLC's in your situation are likely pass-through entities so what they make likely doesn't matter. Their value is more on the legal, asset protection side and so long as you have your assets inside the LLC you should be covered. What may make a difference from a tax perspective is whether the 1099 being made out to you changes the class of income or the deductions you are able to take. That's a question only your accountant can answer. If they negatively affected your income and/or deductions make them change it. If not, I'm not sure I'd worry too much about it. Just make sure they update their systems so it doesn't happen again.

It’s pretty simple as others have said. The formula is (debt/gross W2 income + 70-80% of gross rental income) OR (debt/taxable income) whichever is less. So it doesn’t matter if 75% of your gross rents plus your W2 income adds up to $120k/yr and you only have $1k/mo in debt if your itemized deductions reduce your taxable income to $20k/yr. In the bank’s eyes you only make $20k/yr and likely don’t qualify for that $500k loan.

@April Leclair it feels as if you are looking for approval for what you did. Unfortunately you ignored a warning sign and broke a rule of thumb on top. I hope it works out for you but don’t be surprised if you end up being 100% owner through foreclosure before this is over. The financial qualifications are in place for a reason and they are more relaxed than I’ve ever seen them. Helping with a down payment is one thing but helping someone buy a house they can’t afford is another. You were trying to help but you likely put them in a bad spot that will ultimately hurt them. This leads to the rule of thumb you broke. You should almost never do business with family. It rarely ends well. If they get into a tight spot financially they will expect you to bail them out. After all, you are already on the hook as you signed on the loan. Worse yet you are a minority shareholder in the property so you cannot force them to sell. Your only options will be to pay the mortgage for them or let the bank foreclose and ruin your credit. If you are lucky you can buy them out but good luck evicting family for non-payment of rent. Let me know how that turns out for you. I really hope it doesn’t go this way for you but don’t be shocked if you find yourself in this position sooner than later.

@Remington Lyman I am not looking in Columbus... yet but I have noticed that property taxes are ridiculous and convoluted in the Dayton area and had heard Columbus was similar. I’m used to simple, straightforward, and affordable but apparently OH doesn’t believe in that.

@Remington Lyman I know you aren’t fond of Dayton and I’m curious, are the property taxes as convoluted in Columbus as they are in Dayton?

I’d be interested in a mastermind group also. I live in Landis, just south of Salisbury, but am actively looking at deals out of state.