All Forum Posts by: Joe Splitrock

I would remind the seller that the contract states the seller has to deliver the property in "substantially the same condition". So the seller either needs to repair the damage and restore condition or sign over the check so you can repair the property. Half the check would arguably repair half the damage.

How much money are we talking? If we are talking $1000, it probably isn't a big deal, but $20,000 probably is. Another question is how much is the property worth in current condition? Taking half may still be a good deal for you. Sometimes people dig their heal in to "win" because they are right. And you probably are right, but winning might mean losing the deal. Is that actually winning?

Part of the issue is that prices are moving up fast in todays sellers market, so sellers feel emboldened. If the deal falls through, they can probably find another buyer so they don't feel any pressure. A letter from your attorney may make them feel more pressure, but hard to say.

 It is not the same, but has the same effects. My lease specifically include incense and candles. I have seen major damages from candles. Sometimes incense is burned to cover up pot smoke smell too. I would send notice to tenants letting them know burning incense, candles, cigarettes, marijuana, e-cigarettes and vaping are all prohibited due to air quality issues and to protect the property from damage. Even though it is not in your lease, it doesn't stop you from prohibiting it. It just makes it hard to enforce, so add to your lease for the future.

I would recommend having a tax professional file your taxes. There are complex aspects such as depreciation that need to be understood. You can read up on all of this at the IRS website if you want to learn how to do it. At a very high level rental income and expenses are claimed on a Schedule E form supplemental to your 1040. You need to calculate depreciation on the structure. Failure to include depreciation means you lose a big tax benefit and you still have to reclaim depreciation when you sell, which means more taxes while you own and when you sell. 

https://www.irs.gov/publicatio...

Schedule E form

https://www.irs.gov/pub/irs-pd...

Schedule E form instructions

https://www.irs.gov/instructio...

I have posted near 10,000 responses on BiggerPockets, helping thousands of people work through problems. I have never asked any one of those people for anything. Every friend of mine has been offered investing advice and help/mentoring on buying rental properties. I rarely ask for anything from anyone, but my life is filled with abundance. 

The best thing I can say is always give without the expectation of receiving and give way more than you receive. Do that and your life will be filled with abundance.

 The problem is to most people, AC is just a metal box sitting outside and they have no understanding of how electric or mechanical things operate. They turn the temperature up or down and expect the space to immediately reach their desired temperature. Maybe you can find a video that explains, but basically heat is exchanged inside through coils into the coolant fluid. That fluid moves outside and releases the heat outside. When it is too cold outside, the fluid gets too cold and it can freeze or thicken. The compressor is basically a pump that is moving the fluid between inside and outside. If the fluid is solid, it can't move through the pump. This strains the compressor and can cause it to burn out or wear out premature. On the flip side if it is too hot outside, the coils can only cool the fluid a certain amount at a certain speed. That is why if it is 100% degrees outside, the AC will run quite a bit and may even struggle to keep up. I had this with a tenant who moved in on a hot day. They had the door open half the day and the AC struggled to cool it down from 80 to their desired temperature of 70. She had the expectation that they would close the door and within minutes it would be 70. In reality it took several hours to get from 80 to 72. She called complaining that it wouldn't get down to 70, but it was near 100 degrees outside. Another thing that I have found is people believe turning the thermostat down more will cool the space faster. It doesn't work that way. The AC is either on or off, cooling or not cooling. Turning the temperature down will not made it cool faster, it will just cool longer and get colder over time. Other things people need to be careful of is keeping all vents open and clear, but return and cooling/heat registers. They can't put furniture in front of or over vents. This is to maintain proper airflow. You also need to change the filter regularly to not impede airflow. I have had AC units freeze solid because furnace filters where not changed. 

The lease is not final until both parties sign and monetary exchange is made. Have they paid the deposit yet? If money was paid, that is probably enough to be binding.

I would recommend contacting them and explaining the situation. Give them a deadline to sign the lease and pay the deposit. You should actually do that when you invite them to sign the lease. "Please sign within 24 hours and pay the deposit to secure the property. Failure to do so could release the property to another applicant."

We actually have people sign a deposit to hold prior to the lease. We tell them they have 24 hours to sign the deposit to hold and pay the deposit, which holds the property. The deposit to hold states that the deposit is forfeited if they fail to sign the lease or take occupancy. Then when they sign the lease, I require first months rent. I don't sign the lease until I have deposit and first months rent in secure funds. 

As I said, give them a deadline to sign as a courtesy. I would actually call them on the phone and not just text. They can explain what is going on. It is pretty typical in my experience for people to take a couple days to sign a lease, which I think is reasonable.

We generally don't do annual maintenance. We have them change furnace filters every three months minimum. I know most HVAC companies recommend annual cleaning, but that seems excessive in my experience. We have them cleaned when a repair is done or every 3-4 years. I am going to ask tenants to clean out their AC condensers this spring. I had sprayed out a couple last fall that were very dirty. 

If you want tenants to do something, send them reminders and spot check up on them. If you want preventative maintenance done, you should contract it yourself. If you go along for the service call, it can double as an annual inspection. 

We moved to a strict cancellation policy on our AirBNB. We found with the friendly cancellation policy that half the people cancelled. Even with strict policy, we get the emergency stories. Grandma died, someone is sick, etc. Of course nobody is going to say the reason for cancelling is "I am a flaky person who is unreliable". We follow the AirBNB or contractual cancellation policy. As others said, people have the option to buy travelers insurance. They click a box that say no because they want to save a few dollars. That is their choice.

If you were sued and forced to sell the property, the net proceeds would be available. Also be aware that the property is securing the HELOC, but the interest expense is only deductible based on use. For example, you get a $100,000 HELOC on property A and use it as a down payment on property B. The interest expense from the HELOC is an operating expense for property B. If someone successfully sues you on property A and you were forced to sell, they could get access to the proceeds of the sale after the HELOC is paid off. If someone sued you on property B, that $100,000 would be equity and turn into proceeds after the sale. Even though you still have the loan against property A, you would have to keep paying the payment and wouldn't have anywhere to claim the interest. If the HELOC from property A was used for personal use, the interest (beyond returning share holder equity) wouldn't be deductible because it is not a business expense.

Also be aware if you are in the middle of a legal dispute, encumbering your assets with debt to protect them is not allowed. The court can disallow the LLC and give access to personal assets in a case like this.

Your best bet is to properly market yourself. In todays world that means social media. Facebook, Instagram, LinkedIn and BiggerPockets are all places you should be actively posting. I found your Facebook group and your last post was July 2021. You should be posting weekly if not more often. Your profile on BiggerPockets lacks a photograph, lacks contact information and doesn't even say you are a real estate agent. 

Networking is your best way to attract clients. That can include meet ups, but also just promoting yourself within your friend and acquaintance group. That can be very effectively done in social media. Getting active on BiggerPockets is a great way to meet out of state investors. Sign up for a Premium membership and you can get listed in the BP directly. I am not trying to sell you anything, but all the heavy hitter agents on this site have premium accounts and full profiles.

You can also do paid advertising with Zillow. I know many agents hate Zillow, but that is where your potential customers are, so that is where you need to be.

There is many other things you can do, but my suggesting is start with updating your BP profile today. Then come back tomorrow and ask for more advice.