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All Forum Posts by: John Clark

John Clark has started 5 posts and replied 1397 times.

"non refundable damage deposits more specifically."

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Your statement makes no sense. You can't have a non-refundable deposit for a future event that might never occur. You can have a damage deposit -- refundable if there is no damage. You can have a cleaning on move-out fee, because there will be a move out and there will be a cleaning. But a non-refundable fee for an event that might never occur? Nope. You run the risk of being tagged for false advertising of what your rent rate truly is.

If you are living in the house you can get the homeowner and senior exemptions IF the prior owner qualified on January 1, 2019 (meaning he lived there on that date). If true, you should be able to get a certificate of error. Dunno if you get his senior freeze deduction, as that is means tested, and I don't know if it depends on his calendar year 2018, or calendar year 2019, income.

@Christopher Liffner "I suppose even if I got the drywall up, you could see the wiring date in the attic. The plumbing might be a little easier to drywall up, but access from under the house really kills that one too. "

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Do --- N-O-T --- put drywall up until everything is inspected. Good inspectors will demand the drywall be removed so a complete inspection can be done -- using sledgehammers if needs be -- and you will have spent more money and time.

BTW -- didn't you get a home inspection and list of things to remediate before you purchased?

Now you know why so many towns demand pre-sale inspections. Just you knowing that you're on the skyline tends to make people pull permits and get inspected, right from the jump.

"When I asked why, the city said that's who they get the most complaints about. My thought, "So why not fine the guys who are getting complaints against them vs. making everyone get a license?" "

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Simple. The guy who gets the complaint whines and stalls and says "Town didn't tell me it was deficient," and is now fighting private litigation. Do an inspection between rentals and you take away the excuses of "I didn't know." It's the difference between being proactive and being reactive.

@Nicole Heasley

"Have any areas removed rent control after realizing it was a stupid idea?"

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Massachusetts

"Often, the road to hell is paved with good intentions."

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Reminds me of an old New Yorker cartoon. A highway is being built in Hell (flames all around, devils overseeing the work crews) and at the side of the road is a sign that reads: "Your good intentions at work."

Post: Pay down primary or invest

John ClarkPosted
  • Posts 1,429
  • Votes 1,156

"I am about to sell my first rental property and I should walk away with about 125k ish after all taxes and fees. . . .

still leaving me a decent chunk of change to grab one or two more properties.. . . Or do I take that 125k and buy four or five properties in the 100k range?"

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The above is what the original poster posted. Note the term "all taxes and fees." Now it's been a while since I did a Starker exchange, but can he get a 1031 deal substituting a package of properties for a single rental property?  I don't know. I recognize tax issues, but I don't have tax answers. How many rental properties can earn an owner 12 percent or so for zero work AND secure one's primary home to boot? Given that the rental property has probably been held for a year or more, the OP is looking at long term capital gains, not short term;  a one-off fifteen percent hit.

So do the math, but we'll all agree it comes down to what you can sleep with at night.

What I stress, however, is that the return on investment for debt pay down is NOT zero. AND -- before anyone mentions depreciation deductions -- remember, there is no such thing as a non-cash deduction (non-cash credits, sure, but no non-cash deductions) on your income taxes. Depreciation is, IN THEORY, a determination of the cash reserves you should be setting aside for the restoration of your asset, and anyone who does not set aside those funds (most of us don't) will soon enough learn the meaning of the term "deferred maintenance." So unless asset appreciation outstrips depreciation (and is reduced on your balance sheet by the rate of depreciation), the depreciation deduction is not a reason to buy, or hold, an asset. I suppose one could argue that the deduction shelters income, but so would a loss on sale.

"They are traditionally for properties that just sit vacant for long periods of time (not for a 2-3 month vacancy) and then become a blight on the neighborhood and cause many more issues. . . . Something should be done about properties that just sit for years."

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If it causes a blight, I agree, but then there's usually a building code violation and you can prosecute the owner for that. But taxing a well-maintained house simply because it is vacant? That's stupid. Landlords warehouse units because the numbers don't work.

"A title company is necessary when wholesaling in Chicago."

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A title company is necessary when doing real estate transactions, period. "Wholesaling" is irrelevant. What the poster is looking for is "Which title companies provide bulk discounts?" -- which is a different question entirely.

Post: Pay down primary or invest

John ClarkPosted
  • Posts 1,429
  • Votes 1,156

@Thomas Rutkowski

  Your ROI on cash used to pay down a mortgage is ZERO. Compare zero to whatever you can do with all that money.
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Not true at all, and particularly so in original poster's situation.  First, the OP stated that he was paying PMI, so the elimination of the PMI is a return on his "investment" -- mortgage pay down -- and that's before we consider what the rate is that he saves by paying down the mortgage. Let's say he paying 5 percent interest and is in a 20 percent tax bracket, and alternative minimum tax is not applicable. His effective interest payment is 4 percent. He has to find a 5 percent return investment (and pay one percent of that in taxes (1/5 of 5%)) just to make it a wash. And that's not considering the PMI savings he gets.

So paying down the mortgage is not a zero ROI: It's mortgage rate plus whatever rate the PMI savings works out to be.

The sale proceeds is not a loan. It's simply an asset. Where is his greatest return? It depends, but he's got to use a proper analysis first.