All Forum Posts by: Nuo Shi

HI Clarke, FYI I found my ratio on appraisal from a section called "Cost Approach To Value"

Hi everyone,
I just received the supplemental assessment from Santa Clara county, CA, of my purchase last year. To my surprise, the reappraised value of building decreases by 50% and land value jumps by almost 50% compared to previous value. This huge rebalance makes the final land to building improvements ratio (83% vs 17%). As depreciation is only based on improvement, I'm very limited here.

However, from the last year's appraisal report required by lender, the indicated value from a cost approach shows a land to improvement ratio (61% to 39%). Will IRS allow me to deduct base on 39% * purchase price?  From the article below, it seems no strict standard for the ratio and appraisal can be used as justification. However, this article seems years ago, I'd like to check on the forum to learn if this is out of date and hear more opinions. Thanks!

https://www.marcumllp.com/insi...

Thanks Steve

@Steve Morris

For "Copies of any notes, security or financing agreements, mortgages, trust deeds or other encumbrances which will remain of record after closing." 

Do I need to investigate this myself? Will the escrow help verify the title and any potential lien on the property?

@Andrew Syrios

Thanks Andrew.

1. I have put your list down :) 

2. Ya, the seller can provide me the payment history. Btw, may I ask seller how many people living in the property now? Is that legal?

3. Got it!

HI BP,

1. What should be the rental documents included in property disclosure when buying with existing tenants? I'm thinking about estoppel certificates sent to and received back from tenants; leases; rental agreements; and current income and expense statements. Anything missing?

2. Is that legal to ask seller to provide current tenants' occupation/income? May I ask how many people live in current property? Since I found the lease it's signed by "one tenant name + his parents/families (no name for each adult)"

3. For a month-to-month lease, should I wait until close and send out 30day/60day notification to change lease term (e.g. rent, regular inspection timeline)? Ideally, I'd like to cover the new terms when I sign the lease with existing tenants before close, but since there is a pre-notification period and the property still belongs to seller, I don't know how to manage the timeline. This is in California.

Thanks for advice

Thanks Jonathan. It's a. Idea to test inside the room. This is a fourplex with 3 units rented out already. The rent income is not bad compared to nearby, mostly because it's remodeled lately. In that case, the purchase price is also not low

The property is in downtown with walking distance to train station, target, restaurants, movie theaters, park and etc. However, you can hear the train horn every half hour from 6:00am - 12:00 am. The station is just across the street. Should you buy this kind of investing property as rental? The pro is very convenient for some people, while the con is the noise. 

Wow, thanks for everyone's insights. I do love the BP forum.

For my case, I have to mention this is not a 3.5% down yet 25% and I don't think the property is below market value with similar comps. I believe this is a really bad ROI for experienced investors. Since I have a full time job and zero experiences, I try to stay away from some c/d class neighborhood, which might have better cash flow opportunity, so the option for me is very limited. Considering the OOS, it has to find some trustable network and local connections, which I don't have yet.

I agree, I kind of gambling appreciation in Bay area, with the data from 2008-2018 (peak - peak for the last cycle), Bay area has a 5% appreciation per year. I'm hesitate to say this gonna to repeat, but can I assume a 2% appreciation considering inflation?  IMO, Bay area has strong economy with lots of job opportunity. 

@Anthony Wick

Ya, I calculated the number as if I was not there. I always hear people saying cash flow is the king, and sometimes wondering why this is the case. Does that apply to all?

For my case, I did some stress test for the financial side, and confident that we can pay the negative cash flow out of our own pocket for years without stress sale. We are not actually losing that money, instead we are building the equity. I agree if the market drops, we will lost the opportunity to invest on some good deals with potential higher Coc return. Since my strategy is to buy and hold for long term, is there any insight why the negative for the first few years can still be a high risk?

With our bay area hot market and my zero investment experience, it's almost impossible to find a deal to allow me break even initially. But I do want to enter the real estate arena to learn the new world. Appreciate any advice

@Patrick Mallen

Oh, right. I forget to mention I plan for house hacking. For the negative cash flow, I included the mortgage, maintenance, tax, insurance, vacancy in expense; for income, I calculated 4 units including the one I plan to live in. Not have enough coverage for the large repair yet.

In that case, what's your insight for the period negative cash flow?