All Forum Posts by: Joe Roberts

@Andrew Postell

Thanks so much for this thread and your diligence in continuing to inform the community still 3 years later. 

I have a property that I purchased in my LLC planning on doing a portfolio loan on. Now after reading through this thread I would like to be able to take advantage of conventional rates and apply this method.

Can I QC the deed from my LLC to myself and then file a lien for a mortgage from that same LLC to myself and still qualify to refinance with a Fannie/Freddie loan? If so, any time requirements associated with those actions?

Hogue Hill LLP are very investor friendly and have great rates.

@Michael Plaks Was wondering if you had any more thoughts on the De Minimis Safe Harbor questions?

@Xavier Garcia

As another investor in Eastern NC I can tell you that small multi-family are very hard to find, everywhere from Swansboro down to the SC stateline. I am constantly on the lookout and they are just few and far in between. The few neighborhoods in Jacksonville with duplexes are....less than ideal. Wilmington has some, but they tend to very old (think 1930s or earlier) and pretty expensive because they are near the river. 

The one place that has a good inventory of duplexes/triplexes is New Bern. However, your commute to base will be pretty long, the town doesn't have much to offer (neither does Jax really, but you are closer to the beach and to Wilmington), and most importantly, its an area of flat or even declining population growth and a very low appreciation market. 

My recommendation would be to find a an SFR somewhere between Sneads Ferry and Northern Wilmington and maybe do some live-in upgrades. The appreciation is fantastic in that area and is only going to improve and the rental rates you can get when you move on from the home will dwarf anything in Jacksonville. Hit up @Sean McDonnell for a local investor and realtor (former Marine), who specializes in finding investment properties, particularly for military investors. 

Purchase: 215k

Sale: 335k-commissions and closing costs=315k

5 years interest: 21k

5 years Insurance&Taxes: 26k

5 years Utilities (electric, water, sewer, trash), lawncare and termite bond: 20k (~$330/month)

5 years repairs/maint on home: 8k

Total: 75k

I bumped up the repairs/maint about thinking about a few more things I had done to the home while I lived here, even though some of them were not things that I would have done to a rental property (pergola, firepit), I added them anyway. 

So a 25K delta makes this an asset imo. Just as if I had bought a gold bar 5 years ago for X and sold it today for X+Y. I hypothetically came out on top, making this an income-generating investment (just not over a month-to-month period instead on a 5yr period).

And I will completely leave aside the fact that I used a HELOC (which I was able to do because of the great appreciation on this asset) on this property to BRRRR two properties which now generate $800/month in cash-flow.

@Joe Villeneuve

If the profit on a primary home when sold exceeds the expenses of living in the home, then it should be considered an asset yes?

Example, I could sell my primary residence right now for 100k profit (after commissions, closing costs, etc) over what I paid for it. Leaving aside principle paydown since it's just transferring my cash from one place to another, if I add up all my mortgage interest payments, insurance, utilities and repairs for the home then that is 70k. Thus, I invested in an asset which made me 30k over a period of time. 

Whether or not there were better uses for my money is immaterial, people constantly chose one asset or asset class over others with varying degrees of success. The fact remains that I invested in an asset. 

@Anthony McKeen

Check out Stessa! I love it as a bookkeeping/record keeping and portfolio analyzing tool. Its FREE and as long as you do a good job of entering your expenses in, it can kick out all sorts of great reports for you. 

@Dave Toelkes

Thanks for the info, much appreciated! A couple points to continue the discussion/clarify. 

2. Thanks for the info. So without a cost-segregation study, I will still be able to depreciate my 5yr (free standing appliances), 15yr(landscaping and fence) and 27.5yr(majority of the renovations) renovations along their normal straight-line depreciation?

4. I didn't make this clear but paid for the property and renovations with cash. So what you are saying is that once I refinance, I should be able to deduct the interest payments if I use the refinanced $ for Property #2. The twist is that I deduct the interest on the Schedule E of Property #2, not #1. 

@Michael Plaks

Thanks for answering my questions! I was hoping I would get you or one of the other super knowledgeable CPAs on here to join the conversation! Absolutely understand the CPA disclaimer, this is for my own education :). 

I look forward to your thoughts on DMSH. I got a very detailed line-item invoice from my GC which breaks down everything into labor and materials. It was a pretty heavy renovation but if I can break out line items less than $2500 for individual UOPs to deduct under DMSH that would be great. 

The knowledge I am trying to gain about DMSH will also impact how I do BRRRRs in the future, so thanks!

Ok, so I've got a few more questions for anyone reading this (CPAs???) regarding De Minimis Safe Harbor. 

1. Let's say I do a kitchen remodel and I get an itemized invoice from my contractor which breaks down the remodel into: $1500 for plumbing, $1000 for electrical, $2200 for cabinets, $1500 for granite and $1000 to remove a wall and drywall/paint. Can I take ALL those expenditure that would normally be capitalized and depreciated and apply DMSH to them against their applicable Unit of Property? Example: $1500 for plumbing gets deducted against the plumbing UOP, $1000 for electrical UOP, granite and wall removal against the UOP for the building proper. There is no doubt these are substantial improvements to a home's value, a kitchen remodel can add alot of value, but as I have read it, I can still apply DMSH in this manner, correct?

2. Second question (and from what I've read on these forums there appears to be two schools of thought amongst highly respected CPAs on BP) but can I take these DMSH deductions, in the way presented above, BEFORE I place the rental in service? I.e. BRRRR scenario where the house needs substantial renovations before its rented out?

Thanks @Stephen Rager I am betting others have similar questions. As I have continued my research I think I have found the answer to questions 4, 5 and 6 and the answer is Yes. At least according to the RealEstateCPA in their youtube video on the subject of HELOCs and deducting interest