All Forum Posts by: Josh Darley

We rented a home to three adult brothers just over a year ago and just signed the lease renewal.  Overall they WERE problem free tenants until yesterday when we received a letter from an attorney stating one of the three brothers has been arrested for possession of child pornography.  The two younger brothers are asking to be let out of the lease, as they fear the jailed brother will eventually seek revenge on them for complying with the search warrant at the property where all of the electronic assets were seized.  The jailed brother makes the most income, and I assume the other two would have a hard time covering the rent each month.  We are inclined to let them out of the lease as we'd rather find a new tenant that can afford the home.  The problem I foresee is that the jailed tenant would still be on the lease.  Is the only way to evict him to wait for non-payment of rent if he goes to jail long term?  Are there any other approaches to getting all three of out at the same time?  I can't find any real info on what to do with a jailed tenant other than honoring the lease until they miss a payment.  As awful as the accusations are, I don't think we have the ability to break the lease with him until the terms are broken.  I also need to mention he hasn't been to trial yet, so we don't even know if he's guilty of the accusations.  Has anyone been through something like this?  We will talk to an attorney before making any real decisions, but at this point any advice y'all have would be appreciated.  We're in Arizona if that makes any legal difference.

@Patricia Steiner

Thanks, Patricia. I appreciate the insight. Yes we do have many properties that we manage ourselves so we’re ready for that aspect of it. We do have the reserves, which is partly the reason why my mind immediately goes towards converting it towards a rental. Although at the end of the day, I have to figure out what is best for him.

I appreciate the feedback and will take it all into consideration. 

@Mitch Messer

Thank you for this information. I had never even thought about that. I will take this into consideration. 

Hi BP,

Looking for some advice regarding a property I will be inheriting.  My 85 year old father recently had a stroke and will be unable to return to his home.  He is divorced, has no other kids, and I am the executor of his estate.  He will be headed to a rehab center and eventually assisted living which will be costly.  The home I helped him purchase 6 years ago is roughly worth ~240k and he owes ~130k.  Thankfully we were able to buy at the right time.  He doesn't have any signifcant savings (~10k), and his only income is social security and a small pension which comes out to a total of ~3k a month.  I assume his income will not cover the cost of assisted living roughly estimated at 5-6k per month and I will have to figure out how to cover the monthly deficit.  Not knowing how long he will need this I am unsure on what to do.  He is not in great health overall even prior to the stroke. 

First option is to sell the house immediately and utilize those funds (~100k) to supplement the cost.  The issue I have here is that once those funds are gone in a few years, we will then have to cover the entire cost myself (~3k) for an indefinite period of time.

The other option is convert it to a rental. The rent for the house would bring in about $2,000 a month and PITI is roughly $900. Its a small home, not in need of any capital improvements, so I can assume it would bring in roughly $800 monthly after reserves. We own/manage several properties in the area so managing it would not be an issue. With this option we would be incurring a monthly debt immediately which we can afford, and wouldn't significantly impact our lives. This debt will eventually end at some point in the future. We would then be left with the asset that he intended to pass on his kid and grandkids.

What are the pros and cons of each approach?  If we chose to convert it to rental, and keep all that money completely seperate from our personal finances, do we do it all in his name?  I have a General Power of Attorney.  I know there would be many other factors on how to manage the money here.

It's a difficult time, just trying to formulate a plan.  Once a decision is made I will go talk with a real estate attorney for further guidance.

Thanks,

Josh
 

BP,

I'm having a hard time understanding the true requirements for a 1031 exchange.  I'm hoping someone here can give me some guidance particular to my situation.  I purchased a condo in 2018 for 120k and currently owe about 95k.  I have put about 5k worth of capital improvements in it, and have now depreciated roughly another 5k.  It is currently worth 225k.  I would like to take the ~110k profit (after closing costs etc.) from selling it and use it to expand my portfolio.  Given the above scenario, can I take the 110k profit and buy a property cash, and then turn around and cash refi out of it so I'd have the ability to buy more?  Would the 1031 be done at that point and the cash from the refi free to use how I please?  

Does the new property have be greater than 120k (110k profit + 5k capital improvements + 5 deprecation recapture) or greater than the sales price of 225k?  I've also seen conflicting information about the loan amount having to be the same or greater as well, but in this scenario there would be no loan until after I've had the chance to cash out refi.  Any info or advice would be appreciated.

Josh

Thanks to all for your input.  I can see through the variety of responses that it can be looked at both ways, but in the end it's just a lesson learned on both our parts.  Even though I am of the belief that this is the tenant's responsibility, I will develop a welcome letter to be given to each tenant when the lease is signed in order to prevent this from happening again.

BP,

I just started a new lease with a new tenant on a SFH that we've owned for a number of years. I received a call from her tonight, the first day of her lease, stating that I had done her a HUGE disservice by not letting her know that the water heater and furnace required natural gas, not solely electric for the house, and that she was going to have to suffer with cold water until she could get it turned on. No doubt, I am not discounting the fact that cold water sucks and that it is a huge inconvenience, but she is stating that this is completely my fault. She states that I should have let her know ahead of time and that it was my responsibility to let her know that there were gas powered appliances.

We have multiple homes in the same neighborhood and have never run into this issue before with tenants.  Am I in the wrong here, figuring that it her responsibility to figure out which utilities she will need?  Every house I've owned or rented in my lifetime, I've always figured that this was my responsibility.  Any insight would be appreciated.

Josh

I guess my instincts were correct in this situation.  After having extended conversations about the property, going over details about her income etc., we set up a time to go view the property and she didn't show up.  She never bothered to text or call and never responded to my calls to her.  Overall I am glad it worked out this way, I probably dodged a bad tenant.

I have a four bedroom SFH that is in a desirable area. I have an applicant who makes good money and has decent credit. She states that she recently moved from out of state and will be living with only her 8 month old baby. Overall seems like a good applicant the only problem is that when I do a quick search on Facebook, I can see that she is recently married and they were being congratulated for moving to AZ. There are numerous recent photos as of a few days ago with her husband and baby. I asked her again why she wanted such a big house if it is only her and her baby. She insisted it is not an issue, she just needs to lockdown a home as the area is in high demand. I feel as if she's hiding her husband from the application for some unknown reason. How do you all feel about this situation? Would something you see on social media be enough to question their integrity? Should I just be transparent and say what I found on social media? It wasn't as if I hired a private investigator, I literally typed in her name and it was all there for the world to see.

BP,

I went to do a final walk through today after a the lease expired in a SFH after two years. The house smelled absolutely horrible, a little bit of cigarette smoke and a lot dog pee. We had visited the property only a couple times over the last year (lesson learned), and it did not smell this way. We had an idea the tenant was a smoker, but were under the impression that she only smoked outside. The carpet needs to be replaced as not only does it house smell horrible, but there are a few tears that do not look repairable. The carpet was nowhere near new, so how would I determine how much she is responsible for versus how much of it was on me. Is that just a useful life calculation? Aside from the smell and the couple tears, we would definitely not be replacing it before renting again. How would I go about proving that the smell is so bad that it needs to be replaced. The photos of the tears would not warrant replacing the whole thing, but the smell definitely would. How do you go about proving something that is subjective such as smell?

Thanks,

Josh