All Forum Posts by: Mariah Jeffery

I made an offer on a short sale duplex in Oct. and have been getting sent lots of documents to sign since then. The last thing I heard from the listing agent was as follows:

"Indications are positive with the Lender as they are finalizing documents to include updates on your Pre-approval letter and Seller Documents. Attached is an Addendum for your review, signature and date."

The addendum states the following "Seller to pay $3,900 in buyers closing costs. Buyer to pay negotiation fee to Loss Mitigation Services in the amount of $3,980." Is this typical? Why would the seller do this? My lender limits me to having the seller pay a maximum of 2% toward my closing costs, which would be $3,400 in this case. Should I refuse to sign or tell them I'll only pay $3,400 of the loss mitigation fee?

Would they do this with more than one buyer, or does it indeed look like the bank is preparing to accept my offer?

Thanks,
MJ

Everyone keeps pointing out that depreciation is a loan, but I don't really intend to ever sell these properties. I know plans can change, but I feel fairly confident that I'll either a) buy and hold until I die and pass them on to my kids or b) trade up to something larger via 1031 exchange. Either way, I'm better off maximizing my depreciation now.

Does Al Aliello have a book that I can buy, or just courses?

No offense taken.

I do intend to get a consult with a CPA, as Steve suggested. It has been on my to-do list for a while. I just don't see myself ever completely delegating the task of return prep to a CPA.

One reason my question came up is that I am currently analyzing properties to determine how much to offer. The land's percent of value for depreciation purposes is an input to my spreadsheet, and changing this from 40% to 20% makes a big difference in the IRR. I was not expecting someone on this forum to tell me exact values to use on my tax return, but rather, to tell me if I can expect to find a way to allocate less to the land than what I outlined in the original post.

How do I learn if I don't ask the question?

I do my own taxes partially to save the cost of the accountant but mostly because I'm one of those odd people who loves doing taxes and will spend hours and hours researching how to do them correctly. I don't think taxes for 5 residential rental properties are really that complicated. Depreciation is the most complicated part.

My CPA is myself, and I'd like to keep it that way if at all possible.

I hear cost segregation is very expense, as in the $10K range. Since some of my properties are in the $60K range, it probably doesn't make sense. I do like the idea of backing out the building costs from the purchase price and assigning whatever is left to the land.

I bought several properties this year and I'm trying to figure out how to get the highest depreciation deduction possible. I do my taxes myself and plan to continue to do so.

The value of the land, according to the tax assessor, is generally a very high percent of the property's value. Here is an example of a property that I've bought:

Duplex:
Purchase price - $59.5K
Tax assessment - $63K ($26K for land, $37K for building)
Appraisal - $67K total value

The best I can come up with is to take the $26K for land and divide this by the $67K appraised value, to get 38.8% of the value allocated to land. This will allow me to depreciate 61.2% of the $59.5K purchase price, or $36.4K. I'll allocate a few thousand to appliances, which can be depreciated more quickly, and the rest to the building itself. Is there any way I can justify depreciating any more than 61.2% of the purchase price?

I have another property that I purchased for $72.6K, and did not have an appraisal. The tax assessment is $77K with $26K going towards land. This property has two nice houses on it and I'm sure the market value is upwards of $100K. For this one, can I use some comps to determine the total value and still use the $26K as the value of the land?

I'd really appreciate some creative ideas on how to increase my depreciation deductions. Thanks!

~MJ

Ah, yes. The $11.5K includes my $300/month utility estimate and the PM fee. Still, $5,700/month seems a little bit high.

I've been evaluating a 4-unit foreclosure property. I estimated the rents to be around $600/unit x 4 = $2400/month. Using the 20% figure for Maintenance/repairs/capital improvements/legal/misc, I get $11,503 per year for these expenses. This seems insanely high for these expenses, especially given that I'll be gutting everything and installing new appliances and installing a new roof.

I don't have escrow on this property. Do they still check up on changes I make to my insurance policies?