All Forum Posts by: Jesse T.

I agree the first step is to analyze your current situation and not take on a lot of risk with that money.

Even if it is at a loss - selling the Arizona house is likely to improve the financial situation for both you and your daughter.

If it does turn out that you have some money that can be used for investment - maybe something simple like moving to a duplex where you can rent out half - may help your situation some.

In addition to the risk of buying land and loaning hard money, those investments have very little liquidity.

Did you end up doing anything with the properties?

In your mother's situation, it seems like a short-sale would be the best option.  If her housing was affordable would she be able to pay the rest of her bills?  If she does a short sale and the bank agrees to waive any deficiency, she might not need to go through bankruptcy.  

Fear will tend to dominate the outlook of those who know you personally, but don't know Real Estate investing.  It isn't completely unfounded because there is risk involved with Real Estate.  

There are a couple reasons that those involved in Real Estate are more optimistic.  The most common reason is they are more comfortable with the risks involved.  The motivation to be careful about with those involved in Real Estate is a potential sale/commission.  Make sure their enthusiasm for your potential investment isn't mainly due to their enthusiasm about a quick profit.  

 It clearly can't be included as primary home mortgage interest.  Can it be applied to the rental property since the funds were not used on that property?  I think the advice to get an accountant is good.

Is this the scenario:

You lived in property A. You took out a HELOC on property A to for the down payment to buy property B. You then moved into property B, your current residence.

?

From the point of view of property the HELOC does not qualify as mortgage debt for property B.

https://turbotax.intuit.com/tax-tools/tax-tips/Hom...

If you own rental property and borrow against it to buy a home, the interest does not qualify as mortgage interest because the loan is not secured by the home itself. Interest paid on that loan can't be deducted as a rental expense either, because the funds were not used for the rental property. The interest expense is actually considered personal interest, which is no longer deductible.

I am not sure that it is this bad - I think it can be applied to property A, but I would double check with a tax professional.

double post

 So you are keeping the pro-rated rent?  Are you keeping the pet deposit?  If you are keeping the pet deposit for a pet that never moved in - I would give her the $500 back - insisting on keys and signed termination.

I would probably offer $250 plus the pet deposit and attempt to be done with it.  If she wants to try to get the max amount back - I would give her the pet deposit back and the 500 - %50 daily rent for the time until a new tenant is found.  So if you got someone for August 1st she would get the whole amount.  I think August 14th would work about to about $300 and she wouldn't get much if it was September 1st.

As others have said the main focus should be getting a good tenant.

It looks like the return on the properties is only 2.5%.  Is that including financing?  Is that conservative analysis or closer to best case?

I would evaluate the properties and notes separately.  Although it would seem to be potential for a great opportunity - I would pass if either one doesn't work out.  It looks like you would be on the hook for 330K with this deal.  

How does the financing for the notes work?

A couple things I would be looking at with the notes is the value of the collateral. It really needs to be at 90% LTV for the owner to be able to sell and at least break even. What I would really be looking for is 80% or lower LTV and owners in a position where they can refinance. If they are in a position to re-finance I would offer them a discount on the balance - which still could generate a return of 20%+.

If it is bank-owned your options are most likely to walk or pay the negotiated price.  If it is an individual seller, you may have a little more flexibility.

In either case I would try to get specialists to take a look at the issues before closing.  I think a company that does HVAC could give you details on correcting the CO issue and a rough idea of the electrical work required.  Maybe the agent can help you with ensuring the leak in the upstairs unit has been addressed.

From a landlord perspective property management is expensive.  In a lot of cases placing an tenant and managing the property could be 50%(or even more) of the profit from the property.

Even though it is costly from a landlord's point of view, it doesn't mean a property manager is making a ton of money.

The first step is determining whether you can actually make enough money doing it and how many units you would need to manage to get a good balance between scaling your business and giving customers/properties enough time.  Would scale up to a certain point let you hire an assistant?

It might be a good idea to tweak your compensation structure so that you are aligned with the landlord.  One simple change would be to only charge the renters agent split and add the just over 4% to the monthly charges.