All Forum Posts by: Peter Arroyo

Nicholas Thanks a lot for the info and your time.

It sounds like the second home route may be the better short term (5 1/2 years until retirement and then I'll be in lower income and tax bracket overall) way to go for a while due to the phase out of the passive loss limits. I'm already rolling over a loss year to year on another property I own and I need something that will help me lower my annual regular income tax burdens. Since you're from New York you already know this place has a hand in each pocket and is always looking to squeeze more out of us.

I'll start playing around with the numbers and see which scenario will work best for the next few years. I may have to rework my strategy until the losses really count for something.

Thanks again. Happy tax season to you and your firm!!

Nicholas

First I want to thank you for all of the help you've been providing to so many people here on Bigger Pockets this string of messages is a huge wealth of knowledge all in itself.

I know one of the biggest mistakes you've mentioned that people make is the failure to establish an in service date for the rental property early, I may have made this mistake but I want to check to see if you think I'm technically covered or not.

I closed on a property in October and the house overall is a solid property, just lipstick and polish needed for the most part to get it up to speed. While I was doing all of the lipstick and polish work my wife's friend said she would be interested in the property since she was already looking for a place to relocate in the same area where I had bought. We were thrilled with the prospect of getting someone we were familiar with to take over the space and be our tenant. She was Ok with the price of the rent and the additional costs of the utilities was within her budget. We thought we were good to go, she said that she would like to move in in December.

December came but the family didn't move in because her granddaughter wanted to finish the year at the school she was currently attending so they shifted their plans until June. I'm not going to carry the property for that long and I've already enlisted a realtor to help me out but I was wondering if I can still use the October as the in service date since we thought we had a tenant lined up or if I should just write the carrying costs and other repair expenses off for those few months as if it was my second home and consider it in service when I get a tenant with a lease in place? I realize I will lose out on a good chunk of the write offs I could have gotten if I had put it in service as a rental in October but since I didn't produce any income during that period I don't think I will see any benefit on the pass through write offs if I don't have anything to offset.

What do you think? In service in October? Second home or rental for those 3 months? Will the expenses all just be carried over for 2019 taxes or do you think some will be able to be grabbed now and offset some of my 9-5 income.

Thanks

Pete  

Thanks @Mike Dorneman

Great advice, I do plan on doing a full walk around photos and video of the property for my records. I'll try and avoid the student rental as much as possible. The house is set up really well for a family so I'll stick to that. I also plan to take a piece of the property for myself so that I can come and go as I please to kind of make a presence known.

@Mike Dorneman

Thanks everyone, so far so good. The seller accepted the concession at closing so that I can apply the funds towards repairs that were identified in the inspection report. Look like the closing will be coming up soon.

I was concerned that after all the time and effort and expense that went in so far to get up to this point that the seller was going to be able to pull some excuse on me about how they couldn't work with me due to 2008 purchase price, or just not respond to my request for concession and make me have to fold up and walk away.

I'll keep everyone posted on the final outcome mid October 

Thanks @Michele B. and @Mike McCarthy

I think I'm just going to wait the extra day or so until the report can be viewed by both sides and then see what they come back with and can give towards the repair list. The problem with me being handy is that almost all repairs seem pretty easy to me which is why I'm willing to make the repairs myself for a smaller concession from the seller than a typical buyer that has to hire everything out. But I also agree with the emotional part of it since this sellers realtor has used the 2008 price that they originally paid (which I believe is way too much) as a basis towards our negotiations and the current resale price limits. I am hoping that they see these as repairs they would have to make anyway and just splits the difference with me, but you never know. 

Can a seller back out of a signed deal if they don't like the home inspection report details? I settled on a price which was good but at the top of what I considered a "deal" (only by a few thousand dollars). Sellers realtor says they paid way too much in 2008 and needed to bring cash to the table at closing.

Now the home inspection has turned up a few things that I'd like the seller to meet me in the middle with. I'm super handy and can complete all the repairs pretty much myself but I'm reluctant to go much more out of pocket without a very good appraisal. Can the seller back out of the deal if they don't like the home inspection report? Is there a valid reason on their part to void the deal if the needed repairs are obvious and a little more than just cosmetic? Is not having the ability to make a concession at closing a valid reason to not close the deal (otherwise seller may have negative or zero equity at the agreed price)??

Overall the house has great bones but it will take a few grand to complete the punch list of items needed to remedy: radon mitigation, surface mold in attic, slight leaks at a few easily accessible spots in the roof, electrical service work. Like I said I'm more than capable of clearing all of these issues up, just wondering if I push the seller to work with me more does that give a reason for them to try to get out of the contract? Should I push for the appraisal and see how much meat is on the bone and then use that as a gauge of whether I should push for a concession??  

Thanks @Mike Dorneman I'll work it out with either a neighbor or a friend that lives in PA just a little more than the 20 mile range but not much more than 20. I want to make sure that I keep everything on the up and up to avoid any issues. I know where I live in NY it can take the same hour and a half to 2 hours to go 20 miles as it does for me to get from my house in NY to east Stroudsburg which is 70 miles. LOL but we shall overcome :)

I just noticed that the rental license registration form requests a property manager be designated if the primary owner doesn't live or work within a 20 mile radius. What options are being used by others to satisfy this requirement?? I was planning on self managing since its just a single family home and I'm not going to have any positive cash flow until at least 2 years so I don't want to give up another percentage to a management company. Any exemptions for single family homes that anyone can share? I do plan on finishing the basement and establishing an address at the property so all of this will go away soon, but I want to do my best to comply in the mean time.

How or where is the grading of an area obtained? Is this just a general drive through and scoring of the houses in the area? Is this a realtor determination? Is this just an arbitrary grade based on residents make up? What determines A, B, C or D? Does it go all the to F or Z?? 

I'm sure that most sellers will only go for the sellers concession if they are receiving their asking price for the property. I'm pretty sure if you were able to get the ask price down 10-15% that the owner would then balk if you asked for them to front you 6% of the settled on price at closing toward the cost. I think the mentality of the seller may run along the lines of "I just took a lower asking price for my property and now you're asking me to give you money to close the deal? Why should I give you money to close? Why shouldn't that money come to me?"

It's not that what we are trying to work into the deal is wrong, but it just may take a well versed realtor or buyer broker to explain how and why they should accept it. Many buyers have an emotional attachment to the property and an unusually high expectation of price in the first place. But I look forward to getting my first seller to accept a concession to help lower my costs. :)