All Forum Posts by: Marc Estepa

@Dave Foster, thanks for the note.  I haven’t studied anything yet - I’m actually posting here while I’m at work 😬.  Anyway, the home has NOT appreciated.  In the 12 years I’ve owned it - I’ll be lucky for it to break even.  As it stands, I bought for $242 and 2 realtors are telling me it might be worth $230-240K.  I owe $200K currently.  I’m starting to think this is NOT an option.  Thoughts?

@Scott Wolf, I WISH it would’ve appreciated.  I bought in 2008 and the market crashed.  I thought it would be the base I would be stationed at forever, so I bought in an exclusive part of this neighborhood.  

As the Soldiers started coming back from deployments with money in their pockets, homes were in high demand, and the builder bought more land behind me and built CHEAPER homes bringing down my property value further.  

It’s been 10 years since I first started renting it out, and it’s bled.  I bought for $242 and 10 years later, 2 realtors are telling me it might be worth $230-240.  I hate it.  

So based off what you’re saying, I CANNOT do a 1031 exchange correct?

@Chris Mills, thanks for the knowledge! Does the replacement property need to be similar in value and condition? Can it be out of state? Are there any limits to the replacement property? What if the home I'm eyeballing is a hoarder house and in need of repairs and remodel? Sorry for all the questions. As for the VA, does this free up that loan?

The 1031 exchange seems relatively easy on the surface. I am eyeballing a property where I am stationed now that is in need of repair. I am in the process of getting prequalified for a FHA 203K loan and was warned about how complicated it is. I'm all about the easiest way possible without headaches. I've been so tunnel focused on the task at hand of getting prequalified for the FHA loan, I didn't even look at other options.

To answer your question, this home has been a rental for 10 years.  I bought it before I found bigger pockets and bought at the top of my price range, so the numbers don’t work for a rental.  

Hello! I'm curious how a 1031 Exchange works. What are the ins and outs of doing one? I have a property that I purchased years ago with a VA loan before I found bigger pockets. Knowing what I know now, that property is simply bleeding me of money. Running the numbers, I simply need to sell the home, but listening to an old BP podcast, someone had brought up a 1031 Exchange. My initial plan was to sell the home, and use those funds to help fund an investment property. How does the 1031 Exchange work?

My understanding is that you can use it toward another home and pay taxes on that later.  I'm sure I'm oversimplifying it, but based off my intent, how can I use this to my advantage or is this even feasible?  Does it make sense to sell or do a 1031 Exchange instead?  

Bottom line: I want to get rid of this house in my portfolio and invest in a different property out of state. Whether I use the money from this sale toward another investment property or do a 1031 Exchange, I'm open to it. Also, because this property was purchased through a VA loan, does this complicate things? If I do a 1031 Exchange toward another property, is my VA loan still tied up? Ideally, I'd like to free up my VA loan as well!! Thanks in advance!

Thanks @Chris Wharton!  That’s what I needed to know, because I’m looking at wildly different numbers!  Thanks!

I have a very basic financing question. I have a home I am looking to buy in need of repair. I am looking at using an FHA 203K loan.

If the cost of the home is $250,000 and I need to borrow $120,000 for rehab costs, is the mortgage I am paying on the home the combined cost of $370,000 or just the cost of the home only - in this case $250,000?  

Does the bank look at these two costs as separate or does it just combine it for everything when using an FHA 203K loan? For example, when paying closing costs - is it based off the total amount I am borrowing, or just on the price of the home?

Is it the same if I were to use conventional financing instead of a FHA 203K loan?

@Mindy Jensen.  Thank you for the input!  You clearly know your stuff.  Yes, this is incredibly frustrating and I thought we were all past it.  While in Hawaii, I reviewed the landlord tenant laws and noted that security deposits are due back to the tenant 14 days following their walkthru inspection, with a line item listing of items being subtracted from the deposit.  If not, the owner is liable for up to 3 times the deposit.  Small claims court in Hawaii is limited to $5000, and landlord tenant disputes over security deposits require both the landlord and tenant to represent themselves.  I have photo and video evidence of the condition of the house prior us taking hold of it and then again the morning of our closeout.  

My concern now is that the owners still feel slighted for having to even pull out the carpet to begin with, and it seems they expected to do a turnover of tenants with little to no work.  She continues to threaten to keep sending us invoices, to which we have not responded.  At this point, we know that this goes beyond what we have agreed upon, and now goes into the responsibility of the landlord for preparing the property for a follow on tenant.  Again, I just didn't know at what point I should continue ignoring it, or consulting with a lawyer.  

Aloha @Gary F.!  To answer your questions, they did not have paperwork to sign during our walkthru.  The owners sent their sister to do the walkthru and FaceTime them throughout the entire thing.  At the end of it, the owners were happy and said they would return our whole deposit.  It was a good day, we ended up handing the keys over and talking with the sister for 15-20 minutes afterwards and left ready to move on.  

As for your second question regarding pictures and video. Yes.  We have pictures from when we moved in and on the way out.  We also have detailed video of every room, window, drawer, etc the morning before we did the walkthru.  I’d post them if I could here. 

It wasn’t until 5 days later that we received texts and calls saying that the house smelled bad.  Once we left the home, they locked up, turned off all fans and closed the windows.  The home reaches 90 degrees inside with no airflow.  Multiply this by a few days with newly shampooed carpet and you will create a smelly situation there.  I’ve learned that continual cleanings after this will just make it worse instead of better.   I detailed a day by day breakdown of this whole ordeal in that “Hawaii Landlord” post from the past 2 months.  

You’re right, the $1000 shortage in the security deposit is a huge pain in the *** to fight over.  I’m beyond the security payment at this point, as I agreed to do additional cleaning and carpet removal to put an end to it.  My concern was whatever invoices they choose to tack on top of all this because they are upset.  I’ve met my end of the bargain even though I should’ve stuck to my guns in the beginning and demanded the deposit back.  I wanted it to end amicably and assumed additional cleaning and carpet removal would suffice going to court.  Now I feel like we’re heading that way again.  Ugh.

@Adam Martin.  Thank you.  I guess that’s what I needed to hear.  It’s just frustrating dragging this whole thing out.  I hate waiting for something to go down and always want to be ahead of it.  It’s hard to think clearly sometimes when you’re in the middle of it and taking fire.  

@Adam Martin, @John Erlanger - thanks for the responses.  To answer your questions, I did not receive my full deposit back.  Following our Walkthru on 1 Sept, only half was returned 6 weeks later with no line item listing as to what was being taken.  In text and email, we agreed that i would pay for the removal of carpet downstairs and another additional shampoo treatment upstairs.  After this, we were to receive our deposit back minus charges pertaining to those agreed upon actions and we would be mission complete.   He has made it clear that we are not to contact each other at the conclusion of this transaction. 

 I paid the carpet cleaner directly.  The owner hired his personal friend to remove the carpet (although I received quotes for people to remove it at half the cost we were charged) and the work was completed.  The amount due back was $3137.50.  At the completion of the work, one week had passed with no deposit.  Two weeks turned into three and we contacted the owner again for an update.  At this point we are about 5 weeks past when we had left the property and the island.  He assumed his wife had sent the check, to which she responded with a snarky email saying that the house still stinks.  

We received $2000 the week before last with no listing as to what was removed or why.  We were debating on pushing back but at this point just happy that it’s done.  At least so I thought.

Last night, the owner’s wife has continued to email us saying we have “no integrity, God will come after us, etc.” and is upset that they are stuck with other bills pertaining to the normal changeover of their property as landlords normally do.  Because she has allergies to dogs, they realize that the best thing to do is to just remove their remaining carpet altogether instead of holding the tenants liable to continually clean the carpet until she can move back in without any allergic effects.  She claims the home is in such disrepair and needs to be disinfected on top of this.

Our carpet cleaner sent specific notes as to the condition and smell of the carpet upon our departure. Additionally we have photos and videos of the condition of every room, drawer, window and of course the carpet from the day we moved in and on the morning we moved out.  She closes her email saying, “more invoices to follow”.  

I don’t exactly understand what that means, or if she expects to receive some kind of compensation for this.  If she continues to send us invoices for work to the house she feels she doesn’t have to pay - I don’t exactly know at which point I need to continue to ignore her, or at what point I need to begin protecting myself proactively instead of reacting.  

What is the threshold before needing to contact a lawyer?  No one has said outright that they are suing the other, but at the same time I feel like I need to be proactive instead of reactive and get ahead of it.  Definitely don’t want to go down this route, but seriously - enough is enough.