All Forum Posts by: Account Closed

I would say a house is a house, a salesman is a salesman and a contract is a contract.

For me it would come down to whether or not I could afford to keep her. Certainly a good tenant who stays long and pays on time is golden. I would calculate where I was at with existing depreciation and probable future depreciation. Are the reserves for future repairs healthy? Or has that been let go because the lady is old and you wanted to be nice with a low rent?  Will the loss in future rent diminish your ability to fund your reserves? For me the decision concerning keeping a good, long lasting tenant at a lower rate is easy when rent loss and turn over costs are factored. The hard part is figuring if there is money left over to handle the depreciation. If not, then I would say you need to let her go. If you are losing money and you keep her, then you have to be ok with the idea that you are providing a charity service.

@David Krulac - A common misconception about appraisals is that they are supposed to be absolutely accurate. Another misconception is that they are ordered because the parties invloved have no clue what the value is.

As for accuracy, the industry considers an appraisal accurate if it is within +/- 10%. Thats a 20% spread in the range of value if the property is valued in the middle. I have seen markets where the range of value for similar properties can be much, much more. Another aspect is that an appraisal estimates the value of a subject property by incorporating the sale prices of other properties. Ever see two properties exactly similar? How about the human dynamic? One realtor might price high to get a larger commision while the next might price low to get a faster sale - you wont see that line item adjusted for in an appraisal. I could go on and on.

All of this brings me to the second misconception. You may ask, if an appraisal is most often not absolutely accurate, what's the point in the first place? The answer is two part. First, an appraisal is only reasonably accurate, and what is reasonable is decided by the client who orders the appraisal. The accuracy needed determines the scope of work (or level of research and analysis). In the case of a mortgage appraisal, the lender knows full well the reliability of the appraisal (which is one reason they only lend 80%), but for them it provides accuracy within a certain parameter. How many borrowers would you suspect would be willing to pay $1000 or more for an appraisal? There is a balance to the system that often gets overlooked. The second part of the answer is why 99.999% of all residential appraisals are ordered in the first place, dishonesty. The appraiser is the person who does not have any interest in the outcome of the transaction. Their fee is not tied to the value as most all other parties are.

So, calculating a value is not the main reason appraisals are ordered. The majority of people on this forum can estimate the value of a property as competently and accurately as any appraiser. An appraisal is nothing more than a tool for lenders and municipalities. If people were honest, there would be no appraisal industry.

Argh. Well that about clears it all up, like mud that is. I would LOL, but am closer to tears. Can it really be this complicated?

Going to the store for tissues and beer. I suppose I have no choice but to engage a lawyer who may or may not know any better. I find I have moral issue with paying an industry to solve a problem that they created.

@Mary

Interesting thread. I have something to say, but would prefer to say it privately. Would you please email me your email?

Run Luke Run! Just kidding. Seriously though, why are you choosing a home 1500 miles away for your first deal? That in itself seems like the craziest part of this deal.

I did a quicky materials estimate and came up with about 10-15k, assuming the electrical and plumbing are ready for fixtures and the exterior needs only paint. That also assumes the low ARV reflects buyers willingness to accept low cost fixtures and materials in that market. Labor is another story. You need detailed measurements so you can accurately estimate your materials for each building component, down to the last screw - I assumed a 4 room structure, the costs will go up a tad if there are more walls in the layout.

I can tell from the pics that the framing is not all done - you have a header dangling out there without support. It also looks like the new header over the window is not supported - is it just me or did they peice in the 2x4 and then just run the header on top of the window, using the window to support the header?!!?!?!. I also question all the debris and hanging wires - removing all of that would be the first thing I did. Then again, not all carpenters are the tidy sort (or created equal for that matter!!!) Maybe that is why the owner is ready to give up - they are in over their head?

Good luck!

I am getting to the point where I cant spend a million hours trying to learn the law and need to ask for help. Any good REI lawyers in Milwaukee? I would prefer one who knows about business formation AND taxes, not one or the other.

Goodness! I wasn't trying to stir this one all up again, I just don't know what to do. My situation is a bit different, so I think I'll try starting a different thread. Thanks for the replies!

@Bill - Thanks for the reply. Yea...I really dont even know what a security is in terms of real estate. I am going to wait on sending my articles for now.

A bit late on this one. So...if I have a member of my LLC who is not going to be active (and as I understand it that will be better for them at tax time), then is the LLC a security? And if so, what does that mean for me? I have my articles of organization in front of me, though I am wondering if I should send them in!!! I was thinking the LLC was the way to go, for liability and such.... But then again, another question I have is if LLC rental income is the same as personal rental income on taxes - in other words will I have to pay self-employment tax if I go LLC on rental income?