All Forum Posts by: Gail W.

My CPA does the whole Sched E

So what if we DON'T move back in? It's gonna take about a month to get it sell ready! :/ 

Um.. yes, it IS a rental property. That part I understand ;)

I think what I'm worried about is the 2/5 year thing. If we lived in from March 2002 until May 31, 2016, then rented it for 3 years and a few months, should we ask them to leave a few months early so we can move back into it on May 31, 2019, (to fix it up/sell it) so I am OK in the 2 years out of 5 Cap Gains thing? Do they look at the very DAY or Month or do they just see 2016-2019 and see 3 years?

Not sure how the lease got extended from a June 1 move in to an Aug 1 end of lease... :/   I don't want those extra couple of months to screw this up!

Good morning BP experts! 

I'm an Accidental Landlord. Bought our home in Laguna Hills for about $350k back in 2002. Kids grew up and split, and we couldn't afford it anymore. By then, it was refinanced a few times to add a pool and such and the current amount owed is $550k.

We started renting it out June 1, 2016 to our friend who runs a Christian Sober Living. He has given us a 1099 (they are an LLC) each year for taxes, so it is documented on our returns.

His lease is up this August. We want to sell the house and use the proceeds to buy the little rental we are in right now. We want to use our VA loan to help us do that, as the proceeds from the sale of the rental house will not be enough to buy it outright, but close.

So if we lived in the Lag Hills house as our primary up until June 1, 2016...and then rented it out since... are we going to have problems with taxes? PLEASE use simple language because I'm still learning :/  (I told you- this is just NOT our forte!)

Some things that may matter, but probably don't at all:  It has an entirely new kitchen, and entirely all new flooring from an insurance covered slab leak back in late 2015.  It was recently refinanced again in 9/2017. It WILL need a thorough scrubbing and cleaning; 8 guys aren't exactly tidy. The bathrooms need upgrading.

Question piggybacking off the OP's... So when you purchase something else from the proceeds in a 1031, MUST it be an INVESTMENT property? It can't be your primary? Thanks!

Lots. Amazingly though, less than if they WEREN'T sober! Its been over 2 years and this is about as "wrong" as it's gone. And it all ended well; they went ahead and hired a weekly cleaning service. 

The amazing thing is... this is a gift.  For them and for us.  We get to give back to our community in a way that not only aids them, but nets us a very tidy profit. Don't get me wrong; there are challenges! But so much less than you'd suspect!  Overall, these guys, which are still the same, original guys from day 1, are successful. They are staying sober, advancing their educations, careers and relationships. The neighbors LOVE them! They help around the community every week! And the neighbors appreciate the fact that they ARE sober. 

One word of advice for anyone thinking they'd like to "make money" doing this... GOD.  This entire project was spearheaded by 2 strong Christian men who had a heart plan. They gathered resources and knowledge thru their churches, pastors and spiritual leaders in the community. They knew we are Christians and saw our dilemma (accidental land lords with awful tenants) and approached us.  I see other sober livings that are not run from the heart and I get the concern. But we are very involved with these men and we care for them- and they know it. More importantly,  they now know God. THAT makes all the difference. That is why this is working. And that is why this is my "biggest thing that has gone wrong". 

May not be a popular view now a days, but I think I'll stick with my business plan :) 

No roaches. Went in and found ZERO evidence of rodents! The place was a bit cleaner than usual- surprise! However, it could be way cleaner. One guy said he saw a large mouse in the upstairs bathroom, however, there were no droppings, nor any way that we could find that one would get up there. Who knows.  We did lay traps and put out bait boxes.

That said, HOW would I be able to increase the rent to cover all these suggestions, mid lease?? Can I legally add all these fees each month as suggested?

We are actually in the process of hiring a PM. Because of this exact sitch. We are too close to them and the fam that runs it, so we need that professional separation.  It's like Mom telling kids to clean their rooms.

MEANWHILE... they just told us to go ahead and let ourselves in any time. So we'll see what's what. All the guys are out of the house all day, until about 5pm, so we'll really get to see it as-is. Unless he sends a housecleaner over. Which he won't.

So I guess immediate problem solved!

My tenants (12 guys- a Sober Living home) told me rats were in the garage...where they keep 5 fridges. On inspection, I saw there was a lot of food dribbles and spills from the fridges and the outer door was left open. I also noticed a small hole where a pipe entered the garage. I told them to keep the door closed, clean up and KEEP clean the food mess and I sealed the hole. I set traps and placed glue traps all over the garage (and bait in the attic of the garage).

Now they are telling me the rats have moved INTO the house. Not sure how as I really looked all over the find access points and the 1 I found, I sealed (where the cable wire comes in). 

Thing is, these are guys. 12 of em. Super nice and quiet but VERY messy. I have repeatedly seen the house just plain dirty; bathroom is gross, kitchen floor and countertop is always "thick", the bedrooms have crap piled all over the floors. And, the one thing that always made me worry about just this scenario...food spills under fridge, stove, and walls where trash cans are. I always tell them they need a cleaning lady, but they always tell me, "We just cleaned!!"  They are completely blind to what I see. Which I get, cuz, MEN. But now... NO.

So I told them we need to come in ASAP to set traps INSIDE each room... I said I can give them a 24 hr notice, but would prefer to come in today. Partly because I really want to see the place before they get in and "clean"...see the true nature of the mess.  I am reading California Civil Code 1954 and am still not 100% clear on if it's legal for me to just TELL them I will be coming into the house this afternoon, 8 hours after notice?  It says YES, if in response to emergencies. IS this an emergency tho?

Also, while I desire to do all I possibly can to retain the value and well being of my house, I can't afford to go crazy! Not to mention, I will be leaving on vacay for a 10 day trip in 38 hours... :/  I want to get this handled ASAP, but legally.

TYIA!

Me AGAIN...with yet another conundrum needing wiser heads than mine. 

As some of you know, we are accidental LLs. A friend hooked us up with her hubby and his friend who now run a successful Sober Living biz from the rental house for the past year (with a lease for 2 more years).  My friend is a realtor. She did the lease for us at no charge as she's not really representing any one- just gave us the forms. (LEARN FROM MY MISTAKE!! I should have had independent representation!! She said since she was not repping either of us, there was nothing to worry about. We (the tenants and I) were the ones filling out the lease forms and deciding what was what. Thing is; who she going home with/sleeping with?? Am I right?? Live and learn.)

ANYHOO-  she sent us all an email a few days after the original signing of the lease a year or so ago that we didn't put any thing down under the section dealing with late fees; what did we want to put in there? She stated she usually tells her clients to say 5% late fee. So I emailed her back that I had the last tenants do only $25 late fee- no WONDER they always paid late!!  She laughed and said, see, this is why you need a realtor friend... she would fill it in and resend it out. You guessed it: Nothing ever went out. 

Fast forward to this year. I made new addendum for things like keeping the 5 extra fridges off the new wood flooring and in the garage only. Or if you turn off the pool equipment and the water turns green, you pay for the refill. They wanted to meet, we did, the first thing they bring up is how bad they think it is that I want to add a late fee...WHEN I DIDN'T EVEN MENTION THAT! So that got my radar going. I then remembered the issue and looked back to see if we ever did get that corrected lease from Mrs Realtor Friend. Realizing it was never addressed and thinking how weird it was that they got so hot and bothered about it when I hadn't even mentioned it, I knew I needed to take care of it ASAP.

So I sent out an addendum via DocuSign a week ago asking for a $200 late fee be added. Since then, crickets. SO NOW WHAT CAN I DO?? Am I screwed?? Is there any way to get this fixed? Thank you in advance, all.  
(Again, learn from my sorry tale!)