All Forum Posts by: Account Closed

Natalie, sort of... honestly my wife and I started a hobby that has now turned into sort of a business. At first it was all fun and games, we restore rare classic cars and get them back on the road again. The goal was to build up to nicer cars and start a collection but things have taken a turn as we've began importing vehicles from Europe and now we have this dream of building classics for companies as a mode of advertising. The thing is, it's been profitable for sure and we haven't paid taxes on 2018 yet because really we didn't think anything of it- we just kept trading up and reinvesting what we earned into more exotic cars. We're in the process of getting a dealer's license so that we can legally sell more than 4 vehicles a year and conform with the DMV laws in our state. So now looking back I'm wondering what exactly we should do as far as writing a lot of expenses off or taking more of a hit (writing less off) and paying more taxes as means to prove income. We're just kind of confused because we're "self employed" and I can't make sense of how to go about paying taxes since it wasn't really intended to be income, just a way to enjoy our hobby. That's why I say we have the deposits to prove income I suppose, and I've kept track of every project we've taken on... I'm just debating what to do as far as writing it all off as expenses or taking more of a hit to prove income for another mortgage. It seems like taking the hit would mean not writing as much off (which I don't think is illegal or deceptive... correct me if I'm wrong- I'm trying to learn here) because we could be seen as profitable or at a loss... either way I'm not sure how to go about getting another mortgage because we'd love to take on another house project but can't necessarily prove income for a loan. 

Thanks for your input Chris. It's a good thing this is neither wrongful nor criminal deception. If I remember correctly it's legal to pay taxes. If you have a problem with my questions feel free to remove the post.

Hey guys! I just wanted to run this by y'all to see what you think- any input at all is very much appreciated!! Happy Holidays!!!

Here's the scenario- let's say I have no proof of income. Can I file two 1040s and pay the back taxes for 2018 as well as taxes on 2019 in order to prove income to buy another property? If I file those 1040s and have 2 years of self-employment income then will that sail smooth with underwriting or will that be kind of sketchy? If my bank account can confirm cash deposits and I can provide an income and loss report and then pay the taxes on the income will that be good enough? 

The ideal situation would be to buy another primary residence and have 75% of rental income on our current residence covering our current mortgage (and then some) so that we can cancel out our current residence and just rent it out. We can move out and bring in $2,000 a month while paying a mortgage of $1,200 (75% of 2k is $1,500) so I assume that would just cancel out as far as DTI goes..? Then we'd buy another duplex for around $200k and have an outstanding mortgage of around $1,500 if we went 3% conventional, then refi later on after renovations like we've done with our current residence.

On our new property, if we can rent out one side of the duplex for $1,000/mo. to get 75% ($750) counting toward income, then we'd just need to satisfy $750 in income for the rest of the debt, right? Or rather, prove income that makes that $750 40% or less to satisfy DTI ratio... or am I totally off? If we prove $2,000 of income, that would have our DTI ratio at 37.5%, is that realistic or would we really need to prove income on the entire $1,500 of the new mortgage (assuming our current one cancels out with the 75% of it's rental income) and have $1,500 be 40% or less of our total income putting us in the spot where we'd need to have 2 years of taxed income totaling $4,000 per month to have a DTI ratio of 37.5%?

Overall my questions are... 

1. Can we prove income for a mortgage by paying the last 2 years of taxes and backing it with proof of deposits in our bank account? 

2. Do we need to prove income to settle the DTI ratio with the entire mortgage of our next primary residence, or is it safe to rely on 75% of rent from the other unit to count toward income thus lowering the amount of taxed income we need to provide (from 4k to 2k a month) in order for our DTI to be below 40%?

3. Would this even be worth it? I mean, wouldn't it be easier to just get a job and provide 2 pay stubs over 30 days proving $4,000/mo W2 income? Even if we just proved income on 2k/mo over two years that would be like $8,000... seems like I'd be better off getting a W2... but would that even work? 

We've decided to hold onto it for the time being, we just refinanced it and can't see a reason for selling it now. Hoping to move on and renovate another property in the near future. 

Thanks for all the replies! 

I've got a question about holding or selling and I'm not even sure if this is in the right section of the forum- hopefully you guys can help me out though as I lack experience but am trying to learn and get through this first deal! Please excuse my lack of perspective. 

My wife and I bought a house a few blocks from downtown Provo, UT and have been renting out the basement and living in the upstairs. We've put a lot of work into renovations as we bought it pretty distressed and in desperate need of a complete remodel. Now we're stuck between selling or holding onto it long-term. Our goal has been to build cash flow to supplement an income of $3000/mo. We are at the point where we can refinance and cashflow around $500 and step away from the property completely (ideally to move on to the next one), or we can sell it and put the cash to leverage our next property. We're real stuck here because we just found out that our house is zoned DT1 (commercial here in Provo) and that we could potentially have a business here... or someone else could at least. We don't know quite what to do... refi or sell...? With our long-term goals being financial freedom through rental properties we don't have enough experience to make an educated decision on how to proceed. Hopefully you guys can help us out a bit, this is our first deal and we've worked hard to get here. Our house is listed online currently for what we would need to make selling worthwhile, but we still aren't sure it's the right thing to do. 

Another note is that the house is right next to the State Liquor Store... and so that is a big turnoff for potential renters around here in Provo. We've heard that the State Liquor Store will be moving sooner than later because of limited parking space and it's location being next to a residential neighborhood, so we think that could be a good reason to hold onto the property until that happens, but who knows when that's going to get done. 

I think your numbers are a bit low on how much you expect to charge for rent in that area. Crime rates are pretty extreme in WV/South Ogden, but you're right where it turns into a nicer area. I don't think you'd have a problem charging a bit more for rent due to the demand in our current economy, as well as considering that public transit in Utah will be free for the next several years offering many people new opportunities to commute. That being said, the numbers look great to me, I'd make an offer... as long as the properties seem to be in good shape. There are lots of variables here, but you'll be hard pressed to find another deal like that in the mid/north Ogden area again anytime soon. 

Thanks Russell! Great point! It's in a college town too, so I'm sure students aren't going to pay the extra for anything fancy. Thanks for that advice, that really makes sense! I'll scope out the area & online listings to get an idea of what other duplex owners have done to renovate. 

Hello! I've been reading and lots recently and I'm seeking advice on my first deal.

I met a guy at Barnes and Noble to sell my online drop-shipping store to. He paid cash and I went into the business section and picked out a book called, "The Book on Rental Property Investing" By Brandon Turner. Real estate investing has always interested me, and I figured I'd learn more and start to take action now that my other pursuit had been passed on to someone else. 

I read that book right away and within a week found a property in my area that I could "house hack" and BRRR. It was way under market value, and the numbers really worked! It's a "legal" duplex... and an illegal fourplex.

We're supposed to close on the 15th of March (so in like 2 weeks!) and I'd love to get some advice so that my wife and I can hit the floor running once we move in. 

Now, the numbers work for two units, but man they'd work a whole lot sweeter with four! 

The first question I have is how illegal it is to rent it as a fourplex instead of just the two units? (ok completely illegal, right?) There are two larger units with bathrooms and kitchens, then two smaller with just bathrooms (though a kitchenette would go nicely and they'd rent in a heartbeat as a studio apartment because the location is between two very large Universities.) What I'm trying to figure out is if there is a way to get it passed as a fourplex, or if it's going to get me sued or something renting out the two larger units, one studio apartment, and living in the other studio apartment. I know the seller did this because in their pictures each unit is blocked off and each was being lived in (so all 4 being rented). I can't find much online on the subject, so what do you think?

Another thing- I have no idea what to do as far as refurbishing/renovating goes. We plan to put some plywood flooring in and fix the outside a bit (the stucco is cracked all over and it's painted pink...) and paint a bunch and put up a new fence that offers more privacy to the backyard, but what are the major fixes or additions to consider when aiming to refinance it and add value? Is there a set list of things, or what is an appraiser going to look for right of the bat that will raise a homes value significantly?

Finally, I just want to know some mistakes you guys have made. Perhaps your biggest mistake when you first started out (or even as an experienced real estate investor) that you wish you hadn't done or that someone told you about earlier in the game. 

Thanks! I look forward to your advice :)