All Forum Posts by: Rich C.

Thank you for the responses!

My tenant wants to break her lease after 1 month to move elsewhere.  I paid the broker 1 month rent to find and process the tenant.  The lease has no early termination clause and the broker agreement does not discuss the scenario if a tenant breaks lease.  Has anyone been faced with this situation before?  Any suggestions on how to approach the broker with regard to the compensation paid?  I was planning to have them find another tenant without paying again.

I currently have the funds available for downpayment and rehab costs in my roth IRA for a rental duplex (the rental duplex is bank owned and thus has no tenants). However I cannot qualify for a loan being an entrepreneur paying myself a tiny salary. I am wondering if I can have someone else, such as my parents, cosign the loan...and what the tax implications would be for this scenario. Perhaps I must stipulate my majority ownership through an LLC?

Having trouble finding an answer on this. Has anyone ever used a conventional mortgage to purchase a property with two buildings under one TMS #?

Property in question currently has a duplex on it and I would like to build an additional detached duplex (total of 4 units) on it and refinance afterward with a 30 yr fixed. I know Fannie allows for 4 units, but I am receiving unclear answers when the units are detached.

I am wondering if anyone has used the following strategy to finance property renovations or pay down principal.

Hypothetical situation: Portfolio of 5 properties that are currently rented but need renovations if goal is to increase rents. The portfolio is being sold under market value.

Hypothetical strategy: Use separate residential financing on four under market properties to cover the sales price of the 5 properties. The contract for the 5th will be for $1 (instead of 5 contracts at 100k for a 500k portfolio, I am suggesting 4 contracts at 125k, and the 5th contract at $1). After a set number of months, refinance or sell the 5th property to get the cash out to pay down principal invested or use for renovations.

I haven't used this strategy before and am wondering what the implications (especially tax) would be. I know that if I sell the property within one year, any gains would be subject to income tax rates. One of the biggest issues I see here is that one can wind up paying a lot more taxes due to the manipulated appreciation.

I wanted to get some opinions here. I own a duplex and one of the tenants has a punching bag stand for exercising in the backyard. Basically you punch it as you move around it. Problem is it forms a ring of killed grass around it. And, the tenant keeps moving it onto new grass when it dies. It's creating a decent amount of dead grass that is getting progressively larger. My thinking is to ask him to keep it in an area where the grass is already dead. Any thoughts here? Am I getting too involved?

Thanks.

Update: The owner is retiring and would consider offers. I suggested a ballpark number based on a comp and was told they don't really want to get a lump some for the property and are looking for income so they want to seller finance. 6% was mentioned. The place needs updating to get market rents (which are 100% higher than current rents) and it doesn't seem like the owner wants to do this. I am planning to give the owner the following options:

1) Ballpark offer prices at 4%, 5%, 6%...5 or 10 yr 30-year amortized seller financed note with a clause for us to opt out if interest rates hit a certain point. I feel the biggest risk is having to refi and pull the renovation dollars out at higher rates when the note comes due, but the acceleration option would allow me to refi at a rate I would need to still get my return in case rates sharply increase before the end of the note.

2) A price given conventional financing, which will be higher than the above.

The owner mentioned they plan to list the property on MLS next month. My offer price for conventional financing is around 20% less than what they plan to list for, so I don't think we are too far off.

Also, we offered cash which allowed us to beat out another higher offer and were able to switch to financing (no financing contingency) before closing. 30 yr fixed @ 3.375%.

Update:

After further analysis, I realized the property was in an area that is commanding higher rents and every year is becoming a much more desireable place to live for young families, young professionals and grad students because of its affordability given the great location.

With that info, I decided to close on this turn key short sale at 310k. It closed in 3 months, pretty quick for a short sale, because the seller was affiliated with the military. There were, however, still a lot of headaches up until the day of closing.

We have just signed new leases for next year that are 30% higher than rental income at purchase which increase the value of the property over 30% given market rent multiples. Additionally, the property is large for the downtown area and zoning allows for more units. Thus, the next step is building a small 1000-1200 sqft back house that would bring in an additional 2-2.3k in gross income.

Thank you for all of the helpful advice. If anything materializes, I'll be sure to post.