All Forum Posts by: Mark Fedorov

I assume here you are talking about estimated income tax.

It is very risky to not pay them, both the IRS and State of PA can levy fines on you if you do not submit taxes when you receive the income (ie: submit taxes on January rents in march)... note that I say "submit" not "pay". What I do is mid December I try to do my best to estimate my total year taxes, and then adjust the last quarterly payment to be a more accurate number... sometimes I get close, if I do not have time, I pay the suggested amount and deal with the residual in April.

I have found that a lower deductible, from say 2000 to 1000 will raise your annual rates by 8-$12. But, my suggestion is to get a policy for your property (State farm, Erie, farmers...which ever you like) and then have the company that collects the rents (or you if that is the case) get a liability policy (or umbrella if you) for $2MM+

So your LLC is not you. ... you have to remember that.

Basicly you are telling the bank that YOU will pay the mortgage, but you will not have the collateral that the bank agreed to take if you default on the loan. From the bank's perspective you titling the house is an LLC's name is the same as titling the house in your sister's name.

So from that standpoint; Yes, i have heard and see other people do that and yes, I only heard of one who was caught by the bank and they had to refinance in like 30 or 60 days. Some people have gotten away with it.

I don't play that game, but if you realize you could get the loan canceled, and then the bank could go to court saying that the transfer to the LLC was not allowed due to your mortgage (they have expensive lawyers to do this, which you will probably be paying for)..roll the dice.

However, I suggest you take a step back... ask yourself WHY you started an LLC? Was it because you want to insulate yourself from potential liability? ... if so, then just buy a good umbrella insurance policy, it accomplishes the same effect, and depending on how big your house is, it may be cheaper than the extra costs you will see in your increase LLC's mortgage interest rate.

Your local zoning officer would be the first place to start, then there should be some state board that regulates hotels, they would have some input.

FWIW: really bad idea.

This is less of a real estate question and more of a family relationship question.

There is the inevitable risk that your mom will not be able to buy it after 5 years. Without asking the question of how much do you trust your mom. you really need to come to terms with that question. After all, in 5 years you will have to come up with a price to sell it to her for. What if she does not agree to that price? what if she does not have the down money? What if she stops paying rent.. you going to evict her?

I really am conservative when it comes to people who have bad credit, I like to give them a break, but not have my whole financial plan rely on that. (FYI: you have your whole plan rely on your mom's ability to make 60 rent payments to her Child and then be able to get a mortgage that she can not right now)

There is no reason for you to accelerate the principal payments, if you are renting to her, you will need to keep a reserve for maintenance problems or capital expenditures.

Why not get a place and rent it out to someone who is NOT your mom and see how that goes. If you mom needs help with rent, then the extra income will come in handy. 

If you want to get the "Child of the year" award you can get your mom a house, but the ROI on that is lower than it seems.

Though at times is seems otherwise, there are rules about student housing. Your local zoning officer would be the first place to start.

Also converting the building would include the cost of an extra kitchen, and the loss of rooms due to having another kitchen and living area, I question if you will get your money back on that investment as quickly as if you were to just keep it 2BR 2Ba ( a bathroom per bedroom is a desirable aspect). 

While you are researching the zoning, check out some of the other apartments, what amenities do they have, what finishes etc that will help you plan. Also, depending on the university, the rents can literally change per block of where the apartment is. make sure you have a good handle on what your house can charge.

@Account Closed, keep in mind these questions should be asked BEFORE you put them in contract, when you are in the sales negotiation you should know as much as you can. Your question (and my answer) was about AFTER they are under contract.

@Roy C., yeah that clinches it for you, your accountant is a bad accountant.

If he actually said  "According to my CPA, in sole member LLC, there is more flexibility as far as using personal fund for LLC vice versa" .. run. do not have him do your 2016 taxes, find someone else.

You have two reasons, and only two reasons to have an LLC, the first is that if you need to share the profits of a joint investment, an LLC provides a simple an straightforward way to do that (though there are others), 2ed is to insulate the owners of the LLC from the liability of the LLC, by moving funds from the LLC to your personal account, you are "piercing the veil" (you should google that term), thus eliminating any liability benefit that the LLC would bring you.

I am often not this forthright, but your accountant is an idiot and he/she is going to get you in trouble (or in more risk than you think you are in...which is worse). Anyone who gives this advice does not know what they are talking about.

@Account Closed is correct, before you buy, you should get a Phase 1 environmental ($1-2K), and do the title search. Since the buyers are going to be more experiences that your average SFH buyer, you have to make sure things are all done.

The contract work would be the same (except roof warranties and HVAC warranties are looked for).

For the sale, the buyers would probably have a lawyer, so you should get one also, incase they try to pull something on you,

Meh... I was a long time investor in Hudson county, and we had about 120 units in Hoboken at one point in time, what I don't see mentioned here is that you are looking at a  cash on cash return, not total return. 

The properties in the area you mentioned (or Hoboken at least) go up 3-6% per year. That just does not exist in a lot of other areas. If you have an 8% CoC investment, and you figure that you are putting 30% down, and that you will get a 4% increase in sell price per year (and assume you can increase Cash flow 2% a year (you should be able to do better, but keep it conservative) .. break out a spreadsheet and do this your self... you double you cash in 7 years, you will see 40% come cash flow and 60% come from increased market value... so you have to sell to see your profits.

Most investors, can not handle getting so much value from the increase in RE prices.. that is why it is a tough market... also that is why I got out.