All Forum Posts by: Matthew Kirkwold

Good morning all,

I am currently talking with a CPA I want to use for filing rental and W-2 income in 2022 which is the year I bought my first rental property. The CPA I'm working with has about 80 other real estate investor clients and in our discussions, I asked about a cost segregation. He checked with the guy that does those studies at the firm and came back with estimations that the study would cost about $3,000 and save about $5,000 in taxes over the next few years on the single family rental I purchased for $199,000 in April 2022. I am wondering at what point is it worth the cost of the study? My initial thought is the cost of the study would prolong my saving up for my next down payment on another investment I want to do in 2023. Do I have the wrong mindset here and should I be more focused on reducing taxes as much as possible? I am wondering what other BP folks have done and appreciate any ideas or points that I'm missing. Thanks!

Hi BP! I have people applying with two dogs and one of them is an ESA. Our policy is $50/mo pet rent and $300 pet fee for one pet and $75/mo pet rent and $500 pet fee for two pets. I am wondering what other people do in this situation? Based on my understanding, I am legally able to charge pet rent/fee as if they only had one pet and that also seems like the right thing to do. Thanks for any advice or input!

@Michael Mackney I contemplate the same thing. My wife and I love to travel hack which involves balancing how many credit cards we open to get rewards for traveling. I am not sure the best way to continue to do this while investing in real estate although I know its possible but a tricky game. We recently closed on our first investment property which added two hard credit pulls to my wife's credit (loan application and loan approval). The more hard pulls you have will make you less desirable to lend to or at least get you higher interest rates. @Mindy Jensen briefly touched on what your talking about in her blog post here: https://www.biggerpockets.com/... (See the sub-heading "The Downside") which I found useful for what I'm trying to do. I thought it could benefit you as well with balancing the right amount of hard credit pulls. I'm interested in hearing how other investors handle multiple hard credit pulls involved with investing in real estate.

@Adam Martin I believe the number of hard inquiry's on your credit report is based on the last two years? I think the number of hard inquiry's under 6 is considered good by the credit bureaus, which is an average of one every 4 months or so.

Thanks @Brandon Plombon!! Yeah I'm really glad I bought it because I'll get so much use out of it on future deals too. Sounds good I certainly will, same to you if you are ever driving through Sioux Falls!

Investment Info:

Single-family residence buy & hold investment.

Located in the Sioux Falls, SD market! Had around $3000 in make ready costs and was able to negotiate $2500 in seller credit after discovering electrical and plumbing issues during the home inspection due diligence! Looking to get it rented as soon as possible and currently learning the ins and outs of tenant screening! I have referenced back to The Book on Managing Rental Properties many times during this process.

What made you interested in investing in this type of deal?

I like the long term benefits of buy and hold real estate and love the feeling of having my own projects to focus on outside of my W2 job.

How did you find this deal and how did you negotiate it?

MLS and using my real estate agent who I initially met on BiggerPockets!

How did you finance this deal?

Conventional loan through a local bank.

How did you add value to the deal?

This was marketed as a 3 bedroom 2 bathroom house with 1056 sqft. It had a den off of the living room and the rooms were separated with a door jamb. The den had means of egress and over 70 sqft. I added a smoke detector and a door in the existing door jamb to turn it into a 4 bedroom 2 bathroom rental! Also, the appraisal came back and determined the house to have 1148 sqft so nearly 100 sqft more than it was listed for. Not considering a 4th bedroom, it appraised for $7,800 over asking!

Lessons learned? Challenges?

The challenges were dealing with the electrical issues and plumbing. Getting the estimates in during the due diligence period in order to use them for negotiation was a new experience for me and helped me learn how important home inspections and proper due diligence can be. What I also found to be very valuable was buying a $40 lockbox to hang on the front door so contractors could access the property without me having to drive there each time.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

My real estate agent is Andrew Adam and he was very helpful for all aspects of the buying process and during the offers I made on about 5 other properties before this one!

I'm not in those markets but what I found interesting was that rental comps I found for my property went up about $150/mo in rent between the time I made my offer to when I listed the property for rent after closing (about 6 weeks). So when running my analysis to make an offer, the cashflow wasn't great year 1. By the time I actually listed it for rent using more recent rental comp prices, the cashflow improved. That could be due to prices going up during the early to mid spring time as rental demand increases or other reasons.

That is a very good point that I didn't consider, it could be that. Yeah for sure, I imagine it would take anyone some time to rebound after this type of event. Their payment history is good as far as on time payments across about a dozen accounts except one that has had multiple 60 day and 90 day late payments over the last two years or so. Perhaps that is related to going through a divorce as well. I am struggling on how to make a good judgement on the credit history so I am glad to hear other perspectives and advice!

Full time structural engineer and beginner investor here, I would recommend starting with your local government building services department. Perhaps they have floorplans from when the building was built and are able to help guide you to the right option that is permitted to be done within IRC/IBC (International Residential Code/International Building Code). If there are quality plans on file, it would be fairly easy to tell if it is load bearing or not and they will be able to tell you if you need an engineer's opinion or not in order for you to obtain a permit for the work and pass an inspection. If the work being done is outside of the scope of the IRC/IBC code that the local government follows, then they won't permit the work without drawings/plans stamped by a professional engineer (PE). As far as needing an architect or civil engineer, you would need a structural engineer (which is a sub-category emphasis in civil engineering). An architect may be able to help out depending on their experience but in order to obtain a permit for work that is outside of the scope of the IRC/IBC, I imagine the building services department would need to see drawings stamped by a structural engineer, PE.

I am not familiar with California engineering pricing but with a smaller job like this, it could be fairly costly especially since significant site investigation could be needed for the engineer to feel confident enough to stamp drawings to remove a wall if it turns out to be load bearing. I am not surprised by the $18K estimate you received. If you want to share more specifics about the property (age, room sizes, floor on top of wall or just roof, plans if any, etc.), I might be able to give a more tailored response on what you can consider for options. Best of luck!

I am trying to understand a credit report I am reading for someone interested in my property and I am aware that the applicant went through a recent divorce. The score is a couple points under my minimum for qualification and the monthly payments due on the debts is only around $150 a month. What is throwing me off is there is an 'account closed with balance' and the balance is a little over six figures. From reading through various articles online I can't nail down what this could be from and do not know if its related to a divorce. No bankruptcy reported so I do not understand how a person has that high of a balance they do not have to make payments on. How do I understand if these are payments the person will still be responsible for or not when considering their monthly expenses plus my rent compared to their income? Also, what are typical amounts of debts tenants have when applying? I understand if they have 3x my rent and minimal debts, they would likely qualify for a mortgage instead of renting so I am trying to learn what to expect as the norm. Thank you!

Thanks Stephanie! That's what I was thinking and I scoured the internet trying to find verbiage in city and state ordinances/laws that would require me to. Also, in SD at least, section 8 and/or voucher program participants are not a protected class. I'm just wondering if there is a more subtle way of navigating this interested person into not applying or if there are no concerns with me deliberately stating we don't work with voucher programs. Lots of different things I'm learning during this tenant screening process!