All Forum Posts by: Jeremiah O'Neill

On the SFH rental I just purchased, I created a list of all the capital expenditures and their life expectancy. For example, I assumed my roof replacement is $8,000 with a life expectancy of 24 years, so $333/year. In the end, my CapEx number worked out to be about 6.5% of my annual rents, only time will tell how accurate this number is. In addition to CapEx, I carry an additional maintenance allowance for repairs throughout the year, leaky pipes, patching a hole in siding, etc.

@Brandon Hall

Thanks for chiming in.  The following are my improvements amounts for various methods:

Assessors ratio- $56k (77% land 23% improvements)

Land comps- $80k (I found a comp that sold at $170k and FMV for my property is $250k)

Insurance replacement cost -$150k

As you can see insurance replacement cost is my best option, but not sure it is defendable.  Brandon, have you used this method?

Also, I am struggling with my future cost basis when I go to sell. Since the FMV was $250k when I converted the property to a rental, is this going to be used as my cost basis when I sell. This would completely ignore the fact that I paid $295k for the property 6 years ago, which would mean paying capital gains on a extra $45k.

Thanks again.

There are not many land sales in the recent past, and the comparable ones I am seeing are selling around the $170k, so using that I would be looking at about $80k for the improvements depreciation value.  Lower than I was thinking, but not sure how I could justify anything higher.  

@Rob Beland  Thanks for the response.  My property is actually in southern NH, Windham to be specific.  I will look at some land comps, and hopefully that gives me a more reasonable value, I am really hoping $50k is not where I end up!  

Is using the replacement cost not a reasonable and defendable approach?

Thanks.

Last year I converted my primary residence into a rental property.   We purchased the home for $295k in 2006 and it lost value over the next few years, now at around $250k.  Per the IRS, I need to use the $250k for depreciation purposes.

In order to determine the ratio of the improvements to the land I looked at my assessors website where they say that the land is worth $170k and the improvement $50k.  That puts the land at 77% of the value and my depreciable amount at $57k! The home is a 1000 sf ranch and according to my insurance policy has about $150k replacement cost.  Question is am I stuck with using the $57K or can I justify a higher amount.

Thanks

Thanks Matt.  We are going under contract with the contingency that it be resolved prior to closing.  Thanks for the help.  

@Matt Devincenzo Thanks Matt,  great info here.   Is it safe to say that the current owners should handle all of this,  or should I be participating?  Of course I would want it cleared up before closing. 

Thanks again. 

I am in the process of purchasing a single family home that appears to encroach on the neighbors property by about 2ft (2ft into the neighbors property and about 15ft long).  Both the lot being considered and the neighboring lot were purchased by the same couple in 1960.  The neighboring lot was vacant at the time, and the lot of interest had a home built in 1920.  In 1986, the mother and father gave the vacant lot to their daughter and her husband, and they built a home.  The mother and father have since passed away and then property of interest is now in a family trust, including the daughter that still lives next door.  They know of the issue, as the document they showed me is the survey from the mortgage company for their property.  It shows both a portion of the house and a portion of the sheds extending over the property line.  I am not too concerned with the shed, but of course the house needs to be resolved. What are the options here?  Will this be a long process?

Thanks everyone.  I think the consensus is clear that I need more estimates.  I will get more estimates, and look into pricing multiple ways, i.e. with more walls opened up for easier wiring with extra drywall costs or leave the walls as-is and pay higher electrical costs.

Thanks again, this has been very helpful.

This is all very promising.  

Thanks for the tips Brent, I will price it both ways.  A lot of these wall will be new, so a lot of the wiring will be done in open walls.