All Forum Posts by: Julie Williams

PS @Joe Splitrock I clearly need to find a really good tax attorney to run this by, not a real estate attorney. I read the info at the IRS link you provided. Thanks for that. It does not say you can't do what I propose, it says you have to divide personal expenses incurred and tenant expenses and that your own expenses are not deductible. Also you have to rent at full market value at all times and family can't stay there during a vacancy, or it would lower the percentage of time it is dedcutible. Another concern is that if I buy the property cash, which I would, I won't be able to find a bank to "refinance" it (they call it a refinance even though it would be the first loan on the place) if I live on premises. I have found exactly one bank, Greylock Federal Credit Union, that lets borrowers buy a property under their name and put it in to an LLC, without calling in the loan and the property I am interested in is not in their geographic area. Every other lender I have asked (it has only been a handful) is allergic to the idea. Either it's an LLC, a commercial loan, you don't live there, or it's a residential loan and you do live there. In my research the only place I found loan products for owner occupancy of multi families and mixed use (shops or offices and apartments) was in Australia.

@Joe Splitrock This is very well timed. There is a four family with one unfinished unit I may be seeing Monday. I ran my scheme by a real estate Vermont lawyer and he loved it. But he is NOT a tax lawyer.  All I need is to get in trouble with the IRS. So if you house hack, and live in one unit, renting the other unit or units to travel nurses or long term tenants, you have to hold the property under your own name, therefore opening yourself up to liability? 

Everyone knows that mutts are better than purebreds. And psychotics...offensive...both to the nurses and to people who are psychotic. 

@Kristin Bassett I will try that again. You don't know anyone in Portland, Oregon, who knows what to do with weed? 

@kristen bassett 

About 25 years ago I was looking for a studio for my art related business that had outgrown my house. A local developer who had his fingers in many pies and was known to be fair and to do good work, said he had a garage behind an apartment building for rent. It had been converted to a metal shop and the shop had closed. He said it was almost ready and that he would either rent me the whole thing, or build a hall around the center bathroom and rent half to me. It was close to my home and two blocks to downtown, so I said great, half the building would be perfect. Standing outside the building the landlord said, "I have to warn you, there are some risqué pictures on the walls on your side." I said, "No problem! Honestly, pin up calendar don't offend me anymore." I walked in, my jaw dropped, and I did a slow 360. All of the walls of the 600 square foot room were covered, in most places ceiling to floor, with women cut out of hard core porn magazines. It was horrifying and overly enlightening. I rented the place and paid a guy to sheetrock over them (hundreds of them), tape and paint. There was one area that they had not "decoupaged" that I only had painted. A teenage guy I hired as a helper ran his hand over a couple of cuts in the wall and asked what they were. I said, we don't really know, but there was porno glued all over the walls and some of these cuts here and there. Later a subcontractor held something up and asked "what's this?" I said, "I don't know, we found a couple of those when we renovated. The metal workers made them". He knew about the porno, and he held one up with an astonished look. "That's a homemade ninja fighting star..." I finished the sentence for him, "which the metal workers threw at the pictures of the naked women." Gave all the women I hired the shudders. I immediately grabbed the phone, called a locksmith and had the locks changed. That day. And I started carrying a boat horn with my finger on the button when I had to walk to the the car at night. I never had any problems. Publicly, it was a high end faux finish and mural studio. Privately, we called the shop "The Porno Palace". 

Thanks @Kathleen James I am now definitely moving to Vermont. Of course, the real estate market has ot cooperate and cough up a house. Do you know if renting to travel nurses falls under STR rules?

Everyone missed a huge benefit of renting to yourself. If you would be renting anyways, because you are moving to a new area or using capital for investing is more important to you than owning your own home, you pay the rent, it counts as non passive income, and you pay taxes on it. Because the rent is pass through income and is going in your own pocket, you only are paying the taxes on the income for rent. That is huge discount. This has to be weighted against the loss of capitol gains tax and the depreciation issue. Oh, and @Greg Clark, if you rent to yourself below market, the difference is supposed to be declared on your taxes and you would have to pay taxes on that difference, so you might as well just pay your LLC market rent.

@Trey McGovern Very helpful thread and something I have been thinking about. I knew about lost capital gains taxes but not about self rental rules, which I will have to research. This was a bit of a different situation because there were tenants. I looked at a rural property In Western Massachusetts, just before the pandemic broke out. It had a house and a giant barn with two commercial tenants in it. It turned out there rents were way below market, which was a strike against it, and the back of the barn, where I wanted to put an artist's studio for myself, was in need of renovation. I needed financing. The commercial lender said they would be happy to make the loan but I absolutely must not live on premises. The residential lender said that they would be happy to make me the loan, and it was none of their business if I kept the commercial tenants but to put the rental income on my personal income taxes! It felt messy and I consulted with a real estate lawyer, which cost me $850. Ouch. He said ABSOLUTELY not to mix my own residence with tenants of any kind because of liability issues. I ended up not going forward not only because all of the above, but also because the house needed a lot of work, the barn's issues that were going to bite me in the *** in time, and I found out that it was on the flood plain below an antique dam/mill pond, on a small river that has a history of flooding and washing out bridges and blowing out dams. Ultimately I RAN from it. (The listing agent lied to me about the flood plain.) It was an interesting exercise seriously considering it. I learned a lot. Now I am planning to move to Vermont, rents are high, inventory of houses to buy low, and I am at it again. I'm looking at a $200,000 house with a non-permitted apartment (!) and an inadequate septic. There is also a boundary issue. I would be making a cash offer. At first it looked ridiculous, but I again thought of forming an LLC and renting it to myself, to protect myself from liability from the other tenant. Before I am ready to leave, I could put in a new septic and get the permit for the apartment to be legal. I talked to the town zoning administrator and she said that these always go through. Then I could rent out the house for $2000 plus and the barn apartment is already getting $1200 and is $200 under market rent. Those numbers are great. It is such a complicated property with the encroachment issue (a corner of the barn/apartment is on the neighbors property) that I probably won't move forward on it. It has been on the market for 27 days. It was under contract and their financing fell though, probably because of the encroachment issue. The rule is if the structure has been there 15 years or more (it has) it is likely to qualify for a prescriptive easement. That should be done before it sells again. Mysteriously, Zillow said it sold last September, part of the pandemic exodus from the cities, I am sure. I may hop in the car (three hour drive) and look up the deed and see if it really sold last year. I may throw up my hands and let someone else deal with that mess.

@Tika Eaton no real news since my last post. I'm in quarantine (out of an abundance of caution) after being in a five family with 13 people at home in three units, not one of them wearing a mask. I had COVID-19 last March and have no symptoms so I am not worried about it. I am getting tested for COVID-19 today, but the nurse I spoke to wants me to do the full 14 day quarantine. I am a bit dumbfounded that the listing agent and my agent I was working with thought that was OK. I turned down the opportunity to see a duplex that had people at home with no masks on once before. My agent also lied to another listing agent, so I have switched agents. I still am throwing properties that come on the market on the MLS in the Bigger Pockets rental calculators and airbnb calculators. One really great duplex came on...beautiful condition...over an acre of land...good, low crime area...and there were two sex offenders within a half mile, one on the same street. If it weren't for my reluctance to buy near sex offenders, I would already have put in a couple of offers. How is your search going?