All Forum Posts by: Rick Im

Thanks, Corby! I came across conflicting information online, so I wanted to double-check with the knowledgeable folks on this forum.

 

Hello,

I purchased my first rental property on October 4th. After a month of renovations, I listed it on the market on November 19th and secured a tenant with a lease starting on December 10th. Before this purchase, I had two other properties under contract but had to withdraw due to unfavorable inspection results. Although I recovered my earnest money, these unsuccessful deals resulted in some expenses, such as inspection fees. Can these costs be deducted as start-up expenses?

Additionally, I viewed over 40 properties this year before purchasing my first rental property. Can the travel mileage incurred during this time be included as start-up expenses?

Lastly, my understanding is that repair costs (e.g., fixing leaky pipes) but not capital improvements (e.g., replacing old countertops with new ones) before renting out the property can also be categorized as start-up expenses. Is this correct?

Rick

I recently purchased a rental property and discovered it needs more extensive repairs than I originally anticipated. If I rent out my current primary residence, I could generate over $1K in positive cash flow, so I'm considering moving into the rental property and handling the repairs at a more manageable pace. I understand there's a one-year waiting period before converting a primary residence into a rental property, but does this same one-year rule apply when converting a rental property into a primary residence.

I have another question. When I purchased this property, I used my HELOC to cover the 25% down payment. From what I've found online, there appears to be a 6-month seasoning period before refinancing, but this may not apply to non-cashout refinances. After completing the repairs, I expect that 75-80% of the renewed property value will be close to my purchase price, and my goal is simply to recoup the down payment. Would this be considered a non-cash-out refinance?

HUD recently accepted my offer on a single-family house, and my bid price is 25% less than the market value, making it a great deal. However, the house requires minor repair work (e.g., several missing railing spindles, a fist-sized hole in one wall, and new carpet for a small section of the living room). I shared photos with several lenders, but they all said that these repairs "probably" need to be completed before closing. As you may know, HUD doesn't allow any repair work before closing. I considered ordering the lender's inspection/appraisal, but this wasn't an option because the water and electricity are currently turned off, and HUD won't turn them back on until I have submitted earnest money of $2,000. The bid price is $281,000, and I have $180,000 in cash. However, I can't use either a conventional or rehab loan. Since the repair work is minor, I would need $100,000-$110,000 for 2-3 months until I can (re)finance for a conventional loan. Any ideas?

When I made this post, I didn't share all the information, which I didn't think was relevant. Since someone clearly sees me as "whining," I'll provide further context.

As I mentioned before, the property was back on the market in the following condition:

"HUD has set the minimum acceptable net to HUD offer amount for this property as 269,300.00. During this period, HUD can and will receive counter offer bids from all unsuccessful bidders, as well as other bids from first-time bidders. HUD will accept any bid that is at least equal to or greater than the minimum acceptable net offer and presents the highest net to HUD."

My original accepted bid was $281K. When my agent tried to submit a bid again, the minimum bid was set at $293K ($269.3K + 6% agent commission + whatever fees/costs HUD has incurred so far). Now, I am in a situation where I would have to pay $12K more for the same property. I hope this gives you a more complete picture.

Hello,

You won't believe this happened. Last week, HUS accepted my bid on a really good deal and I gave the earnest money in time. My agent passed the deadline of 2 business days to submit necessary documents online. My agent came up with an unacceptable excuse ("I thought ...) although the HUD initial email clearly delineates the necessary steps. Today HUD notified that our bid was cancelled because they did not receive the requested information and documents, and the property is now back on the market. If I sell this property after making minor cosmetic repairs, the gain would be 50-60K. I am trying to understand what my options are.

Rick

A 2,000 sq. ft. single-family home with a 1,600 sq. ft. finished below-grade basement is currently on the market for sale. I am considering using the entire basement as my new home office (given my job, I need a large space). I wonder if I could deduct mortgage interest based on the basement's proportion to the entire house (1,600/(1,600+2,000)). I am asking because the below-grade basement is not counted toward living space in Kentucky, even if it is finished, and I was told that appraisers count only half of the basement space when valuing the property.

There was an investment property listed by one of the owners. I signed a purchase agreement with one of the two sellers (the other seller is his wife). For some reason, the wife wasn't available, so we both signed the contract with a plan to have his wife sign it later. Now the seller wants to increase the purchase price or back out. Without the signature of the other seller, is this contact still enforceable?