All Forum Posts by: Nicholas Bolcon

@Lawrence P. Schnapf thank you for the response.  I appreciate the information.  However, I am being told by the environmental contractors that just soil sampling will not do it.  Maybe it will, but I don't have direct control because it is being put on the seller.  I am trying to anticipate worst-case and figure out what the possibilities are with creative financing.  It also doesn't seem like a good idea to me to try something that may not work only to have the lender reject it further down the process. 

Hello BP community,

Some Background: Currently had an offer accepted on a Duplex in West Warwick, RI.  Just did the inspections on Friday and found that there is almost definitely an underground storage tank (for heating oil) on the property that is not in use.  The seller did not disclose it and may have been unaware of it.  Either way I do not plan to move forward with the property without the seller being on the hook for taking the proper steps to "close out the tank".  Talking with a couple of environmental companies around here they are telling me insurance/mortgage company will not go for the property with an underground tank that does not have the proper close out documentation.  And that "close out" likely involves removal of the tank.

The seller is older, in her 70's I believe, and we did already beat the price down quite a bit from asking due to the fact that its only worth what it is worth to us based on the numbers (regardless of the hot market). Obviously they accepted and did not get a better offer at the time.  We also heard from the sellers agent that the seller is just tired of putting money into the property. 

The Question: If we cannot close on the property with conventional financing due to the tank, and the seller cannot afford to remove the tank she could be stuck.  If they disclose the tank in the future, which they should, they will likely only be able to get a cash buyer and even then find one that wants to be liable for the removal.  Simple removal could cost $3500 but if there is leaking into the soil it could cost $10k-$20k easily is my understanding.

Does this make this a potential seller financing deal?  This would avoid the bank, although insurance could still be an issue I suppose.  Could it be structured in a way that the seller finances, and we take care of the tank but the cost of the tank removal is credited off the loan at the end of the day?  Curious as to your thoughts since I do not have experience in seller financing.

Thank you for any advice you can give!

I feel like it's overpriced everywhere in the state. You've really got to look for the right deal. Coventry has lower taxes than WW for landlords but when they want 325k for a duplex with 800sqft 2/1 on each side and it could use a little updating it's hard to make the numbers work. Plus I agree at least you already know what the taxes are in West Warwick but they are HIGH and the town has their own issues. The re-evaluation last year had my taxes increase by $800 in one year and I'm sure they will just keep going up.

Have you thought about some of the MA towns right over the RI boarder? Possibly expensive but good areas I have heard. I think almost every RI town has some isssue.

I appreciate Anthony's insight. I'm probably going to need to try and find off-market deals. But I'm not super experienced in that.

Ok so I could be wrong (not an inspector, lawyer, etc) and I don't live in Ohio, but:

1511.3.1-1: if the recovering is installed to the manufacturers instructions. It's a possibility that some manufacturers may instruct removal of the layer beneath which would leave you out of luck.

1511.3.1.1-3: recovering is NOT permitted where the existing roof has two or more applications of any type of roof covering. So you can't recover over two layers of shingles.

@Gordon Starr I have never heard of someone recommending to put a third layer over existing shingles.  It happens, and its not the end of the world but I have never heard it recommended.  Also I discovered that some insurance companies won't insure even a double layer roof never-mind a triple layered roof.

Luckily I've never run into this situation and I am fairly green so I am not the most knowledgeable, but... I've read enough books and posts on BP to say with pretty high confidence: get an attorney yesterday.  Do not speak to the tenant or their attorney, and possibly not to your PM.

Also your PM is an idiot for having the lease automatically renew YEAR to YEAR.  There does not seem to be a good reason to ever do that especially not in NC where there is virtually no winter.  Even if making sure a lease is run through winter months is a good idea it should not essentially be up to the tenant to automatically renew a lease by staying over.

Be very careful with the lead.  I have a rental in nearby RI and its the law (for non owner-occupied) that I need a lead certificate from a licensed company.  This certifies that the apartment is free of lead hazards (children or not, the only difference is if there are currently children there when you close you have less time to fix hazards).  Free of hazards does not necessarily mean the lead is totally gone, but it has to be properly covered (paint, drywall, wood, etc) with no damage.  When practical I would prefer to remove the lead because then there is no chance it can become damaged and cause an issue.  I also like to do it for my conscience.  I don't want to provide a place for people to live that has any danger of lead hazards.

Even an adult tenant can purposely expose the lead and hold you up in court without having to pay rent.

@Natalie Kolodij Oh of course.  I already had a conversation with my accountant about the flip, we will figure out some more of the details at my tax appointment in a couple of weeks.  From all the advice I have heard on here I am not willing to try it on my own and I think a good accountant is worth the money.

Some people find it boring but I am kind of excited to do some "tax planning" and see the ways I can save money or get a better return.

@Natalie Kolodij The create a bigger plan is a potential for me.  I have a flip hopefully going on the market in the May-June time-frame this year so passive losses from last year may be able to offset that profit from this year as well.

To clarify for everyone who seems confused, I believe the OP is talking about the fact that if you make under a certain amount of MAGI (may be 150k not sure but I thought it was 115k) you can deduct up to a certain amount of passive losses from your regular income.  So if you are making under a certain amount you do have the option to not solely offset passive income with passive losses.  This is a question that actually could affect my taxes this year, I'm not 100% sure yet which is why I will ask the accountant.