All Forum Posts by: Account Closed

Hello Vhernadette.  I'm an agent/investor/property manager in the Philadelphia market.  Feel free to reach out to see if we would be a good fit.

Thank you all for the responses.  I have a much better understanding of my situation now.  It sounds like I have to buy enough real estate that is equal to or greater than the net sales of the property I am selling AND spend all proceeds.  In my case, since I have no proceeds, I just need to satisfy the former.

To shed more light into my situation.  Yes, I refinanced at the top of the market, and prices look like they are falling or will be falling.  I am trying to be conservative with my estimates.  The refinance proceeds have since been invested into other income-producing rental properties.   

Here is my situation:

I bought an investment property and improved it.  All-in for $200k cash.  I refinanced it and have a mortgage on the property for $450k.  I'm planning on selling it now and it should sell for about $500k or less.  Assuming $50k in closing costs, I should have $0 in proceeds from sale or even bring money to the table to pay off mortgage.

Net Sales Price will be $450k ($500k less $50k closing costs)

Cost basis is $200k (assume its already adjusted for depreciation for simplicity)

Capital Gain is $250k 

Am I right to not include the refinance proceeds in the above scenario when calculating capital gains?   If so, I want to do a 1031 exchange to avoid capital gains tax.  Would that be possible?  If so, how does the refinance play into that?  Also, the fact that I won't get proceeds from settlement.  

I feel like I'm missing something here.

Same.  I'm literally in eClipse at least 30 minutes a day now fixing something to resubmit.  You are right about them being very inconsistent as I fill out these forms the same way, every single time, but nothing gets approved the first time.  I think your theory is right, it's an indirect way to limit evictions or slow them down by making getting a license as hard as possible (and hopefully inexperienced landlords just give up on getting one.  Then when its time to evict they'll tell the landlord they need the license and then it'll take a few weeks of going back and forth to finally get properly licensed.  And even then, they won't get a judgement for any money because their rental suitability was dated after all the rent was due.  SMH).  Does anyone know which city council members are the investor friendly ones?  I need to talk to them about this.   

@Alan Asriants  it's mainly the random nonsense that's killing me.  #1 can be annoying too, but at least I can track these accountants down lol.  

Investor and property manager in the city of Philadelphia and have been doing this since 2015 and have successfully pulled dozens of rental licenses in the last 8 years.  Within the last  2-3 months, I've tried to pull about a dozen rental licenses on the eClipse system.  Almost all of them have been kicked back at least once.  I think about half of them has been going back and forth with someone at License & Inspection.  It feels like each time they send it back, they are picking on something else.  Usually they are picking on something on the supplemental information form.  Sometimes directions to fix the applications are vague with no specific directions.  On a few cases, their issue with the application is wrong and I have to write a note and upload it to them since there is no chat feature.  Is anyone else experiencing the difficulty I am?  If so, is there anything we can do?  Does anyone have any insight on what's happening at L&I?  

I'm in a very hot market and sometimes when I'm working with flippers or any home seller, we'll get offers way over asking that we go into escrow with.  Some times we can't get them to agree to pay the difference if a low appraisal comes back.  I had a few flippers who have taken tens-of-thousands-of-dollars hits to their profit because of that.  Your situation is similar in that you are trying to cash out your "profit" (or equity in your case) with the refinance.  If the appraisal comes in low, you'll take a hit to the amount you can cash out.  A way that I have learned from an appraiser of many decades to help with this is the following tactics.  The following does assume a very hot market that is appreciating rapidly.

Warning: It can get a little confrontational.  If you are the one who is going to allow access to the appraiser, which you should be since you're the landlord, make them call you for access.  Don't give them a lockbox code or tenant access.  When they call you, you ask them 1) "Are you checking prices are stable or appreciating in your appraisal report?"  If they answer stable, say that you don't trust that they are competent enough to do the job and you'll be requesting another appraiser.  If they check appreciating, move onto the next question. 2) "Are you making time/market condition adjustments to your comparable sales?"  If it's some form of no, you request another appraiser.  When you talk to the lender, you disclose the questions you asked to share why they need to find someone who is competent enough to make those adjustments.  

One thing to watch out for in my prescribed tactics is that it applies more to single families and small multis (4 or less). Once you get to 5+, it's all about that cap rate so both questions may not apply since 1) prices are based on NOI and cap rates and 2) values are based on NOI and cap rates lol. I'm thinking the question you should ask in that case might sound something like, "Are you making time/market condition adjustments to cap rates?" I'm not a large multi-family guy so I can't be sure.

To answer your original question, no I don't think it really matters what you tell the bank what you think the value is.  On one of my most recent purchases, I told the bank its probably worth $180,000 on a purchase price of $160,000.  Appraisal came back at $245,000.  Too bad banks won't lend on purchases based on appraisal too lol.

This sounds like a CPA question, which I'm not, so please verify with your accountant.  Any entity or person can hire an employee so you can pay him a W-2.  Based on your question, it sounds like all the rental properties are owned under the S-Corp.  If that's the case, the S-Corp hires the employee and pays him.  The employee salary is a deduction against rental income.