All Forum Posts by: Robert Hooks

There should be an appraisal showing the value. Also ask for personal financials. For a loan of this size and especially quick nature it would be market to ask for 1-2 points up front. 

I am going under contract on an off market apartment building. I found the property through a referral from a friend (unlicensed). I want to pay this friend a referral fee but I am wondering if a) I can write this off as a closing cost (or other) and b) does them being unlicensed matter other than technically needing to give them a 1099 (the amount will be more than $600).

Any help/guidance is very much appreciated.

Rob

@Sean Honeycutt just like everything else.... its a numbers game. I recently made a list of 50 credit unions and banks to call re Helocs on investment properties and I can up with 1 in CA that would do it for a worthwhile CLTV but they had weird arbitrary rules that I couldn't work around. People have mentioned Penn Fed and Quorum. I have spoken with PFCU and they will do them but the CLTVs aren't great or at least weren't great 3 months ago. Maybe that has changed. Quorum is on my list to call this week.

After making so many of these calls I realized that on the HELOC pages for these FCUs and banks if you sroll down to the fine print it will tell you most of what you're looking to find out. Saved me a lot of time vs calling.

Good luck.

@EricSchultz any recommendations for banks, lenders, CUs in SoCal that will do HELOCs on non-owner occupied 2-4 unit properties? I've called probably 50 banks/CUs and most of the time the answer is no. Fremont Bank does them but the CLTV is capped at 65%. Since you're in SD, wondering if you have any suggestions.

@Kristina Lugo

Good advice from @Steve K. and @Caleb Heimsoth - listen to those guys.

The other thing you could try is ask the seller to carry back a second loan but see if the lender will be ok with it. 

R

Raise the rent and see if they give you a written notice. JK

It sounds like even if they do not move out this month or next they are thinking about it. 

I would ask them to cooperate holding an open house next weekend and see how they respond. If they respond aggressively just tell them you are trying to cover your bases and ask if this was just a whim thought or are they intent on moving as soon as they find another place?

If the latter then push to show and as referenced above check with state and/or local municipalities on specifics rules and delivery notice instructions/time frames around a landlord's notice to enter which one valid reason for doing so is to show the unit to prospective tenants.

If you have not been in the unit in a while this is also a way for you to do an inspection it as you show it. Be sure to take pictures of any damage that you may want to deduct repairs for from the security deposit.

They may be friends but at some point it has to be business.

Good luck.

R

Wouldn't touch that liability with a 10 ft pole. #rooftesting 

@Laura Hines Re the 1099s I would consult what sounds like your eventual CPA on their opinion Mine just told me once you send one you need to send all, so dont send any until a mandate gets passed. Saves you time and risk, but I'd just be clear up front with whoever may do work above the $600 limit on your place that you do not intend to submit a 1099. Most will say ok.

I have one bank account for all of them and to be honest I find it easier as I know all of the rent checks go in and all of the expense checks go out of the same account.... it helps me back track and have confidence I am not missing something because I may have paid it from a different account. I guess one more account wouldn't be a bother I just have not gone that route. Perhaps I should.

I'm a commercial broker so I think that helps me qualify as a real estate professional as well, but you'd me amazed how many things you do add up to quite a lot of time spent on the property/rental activities. Aka driving to and from to pick up materials etc.

On the one side question you could (and perhaps should) put it into an LLC and then you can lease back your unit from the LLC - BUT wait until the loan is packaged up and sold off as you do not want to do anything that would allow some jerk lender to call the loan due.

Again I would ask your CPA on these points as I am not an accountant and am not qualified to give professional advise on these subjects.

R

@laura hines

@Laura Hines - responding to your first post. A CPA is pretty critical especially if you continue to buy more properties. If you're living there you really want someone to document and help correctly calculate mortgage interest write off percentage of a primary residence and depreciation. I live in the back unit of a triplex I own and I just feel more comfortable having them submit my taxes with the blessing of their review than do it on my own. 

The credit cards and bank account are ok although I have 4 properties now that I keep detailed P&Ls for which I turn over to my CPA and I do not have a separate account/accounts for the properties and to date I have not had any flags raised because of this - knock on wood.

One thing I would make sure to avoid is submitting 1099s for work done by contractors. Keep it one way or the other. Send them to everyone or no one as their seems to be a grey area here on whether they are required on residential 1-4 unit deals.

Keep a log of the time you spend as they are getting more strict on the reporting to justify qualifying as a real estate professional which as Im sure you know, depending on what you make at your day job can have a tremendous benefit at the end of the year when it comes to rental income. 

Hope this helps.

Rob

@Spencer Cornelia thank you again for the time here. You made a good point of what if something happens.... need to think on that a bit more because while I would say yes I am comfortable about having the reserves there is no telling what happens job wise, health wise, etc for a decade... not to be morbid. But the uncertainty and risk were not forefront in my considerations when it make sense that they should be.