All Forum Posts by: Michinori Kaneko

yep last year i only had 1 property that was rented at the end of year. this year i have a lot more so I wanted to make sure i'm not doing something stupid! I'm a CPA too but i don't specialize in personal tax so i'm not going to pretend like i know what i'm talking about haha

Chris are you in the Fort Wayne REIA page on FB? that's probably better place to ask since it's indiana specific question. I am not sure about your Q because i haven't filed my return this year, but last year i used turbo tax and i don't think i paid any state tax on my one property i had at end of 2018 (not that turbo tax is very accurate)

Thank you both.

thanks @Natalie Kolodij i was going to tag you too once you accepted my colleague request but you beat me to it :)

@Steven Hamilton II I apologize for tagging you here, i know you are very busy with tax season but would be great to get your inputs on this.  My property manager includes the advance rents receive + December rent incomes (which I do not receive until January) in 1099.  Some tax professionals above stated that it should indeed count toward 2019 income as long as the PM received it, but my CPA (and also Michael R's CPA that i tagged above) disagrees. 

In response to our inquiries, our PM sent us Publication 538 and cited the "constructive receipt" that @Basit Siddiqi above mentioned.  However, reading it through, the last sentence states Income is not constructively received if there are significant restrictions or limitations.  The PM's stance is that they have done owner distributions earlier in some cases, but my argument would be that if I had to ask my PM each time i want distributions earlier, need their approvals, and it's not an option to every investor at all times, than that would count as a restrictions/limitations.  

I would love to hear your thoughts on this.  Thank you.

All those that are talking about evictions, think about what happens AFTER the eviction.  the market will be filled with people who were either evicted via court process or cash for keys, and most likely the most tenant you place (if you could find one since there will be so many other landlords evicting and looking for new tenants) then you'd probably stuck with one that was evicted by someone else.  There will be lots of turnovers and lots of other landlords trying to fill their units for lower rents.  Personally i think its smarter to work thing out with the tenants and get through the tide together.  this way maybe they will appreciate what you did for them and stick around longer even after we get through the chaos. 

I don't think they will freeze the mortgage payments, because then what happens to the banks... guess they'll just have to print more money and give out free money out to the banks....?  If they do infact freeze the mortgage, i hope that also doesn't impact the credit scores...

and thanks, for taking your time to respond back on my thread

@Stephanie P. Sorry if i've confused you. what i mean by the 20% and 30%, currently the owner is offering to basically pay 20%. If i put down the 30% instead of him paying, effectively i'm already down by 50%, meaning of the total purchase price, i was originally only liable for 80% (but with no money down), where as no I am liable for 100% and putting down 30%. So instead of me getting a 20% off deal on a no money down deal, now i'm paying 30% out of pocket on a no discount. I don't think the total price is inflated, like i said NOI/cap rate gets you to the total purchase price (before the 20% seller finance). i think i am confusing you there.

Second thing you mentioned is an interest thing. so basically we refi on the mortgage, then use that proceed as a purchase of the LLC ownership? I'm trying to see if that make sense from title perspective since a) even if i knew him he's not going to give me majority interest in LLC without the payment first, and b) the refi will use the building as the collateral which is held by the LLC, so i'm not entitled to the refi cash? What am i missing?

I agree about Hard Money. that is my last resort. that's i wanted to ask for alternative routes here before i go down that path. I am ok with putting some money down. its just that 30% of this deal (or even 20%) is a significant amount, i don't think i can come up with that kind of money out of pocket. 

@Stephanie P. i am aware that the appraisal uses income approach, as i mentioned the purchase price is NOI/ local cap rate and the NOI I am using is what was reported on the seller's schedule E for 2019. The building does not get top dollars and lots of vacancy, but still cashflowing a lot (enough to cover mortgage payments) and that also gives huge potential for improvements in the revenue in the future. I understand that 20% owner's forgivable loan makes things more complex, that's why i am here to ask for help and recommendation. Between the 20% he is offering and 30% you are telling me i need to put that, that is a difference of 50% of total purchase price. This deal is appealing because it is a cashless deal (not sure if you listen to podcasts, but cashless deals are dreams of investors). Yes it's difficult to overcome all these issues. that's why i am asking for recommendations here, I already know that its very difficult to get a mortgage via traditional methods. Essentially i am asking for recommendation on someone who's willing to lend based on the buildings cashflow only. Maybe my only option is hardmoney lenders, but i wanted to see if there are any other lenders out there willing to do something like this. i understand if you aren't one of them.

Hi, I do definitely see your point about the "inflated price" but my thoughts are if you calc the NOI/local cap rate the actual value will end up around the total purchase price. I do know the owner personally.

This will be a long term rental.  There are areas in the building that can use some work, but is not essential and does not impact the rest of the building, so i don't intend on doing any immediate rehab (maybe if the occupancy nears max i will eventually consider putting in some money to fix up the areas that are currently not being used).  The property has an onsight manager who excel at what she does and she has been there for a very long time.  I do have capital that i can put into the deal if i had to, but prefer not to if i could keep it as a cashless deal (who wouldn't?). 

This will be my first commercial property. I do own some duplex and triplex.  Thank you