I was listening to Podcast 29 today and the guest was asked if she ever accepted cash for rent from her tenants. I was quite pleased to hear her say no, she did not. Recently, someone in my husband's family told me something that has upset me greatly. I have known that these people do some shady things, but was still shocked when the person told me that they insist their tenants pay them in cash. When I asked why they would do that, she said so they can claim on their taxes that it is unrented! She said she just puts the cash in a safe. It bothers me so much that some people cheat their way through life, but always come out smelling like roses. I want to surround myself with people with integrity. That is my number one priority. Rant over.
Shady people like that will not last long in a complex business like real estate. That person may put on a act like everything is A-OKAY, but sooner or later they will get caught...
There is nothing wrong with taking cash as rent, but you need to report it.
He/she may be shooting themselves on the foot more then one way. Sure this person can cheat the IRS but when they applied for a loan personal or business there is no income to qualify them, because lender will go off the tax returns. This may limit growth. I think the risk also lies with the renter, where is the proof that the rant was paid? A rent receipt? Now there is a keeping conflict. In this business there is plenty of ways to make money without messing with the most powerful entity in the US (the IRS).
This person once ran a daycare from their home and also didn't report to the IRS. It took a few years, but when parents were claiming their child care expenses on their returns, it finally caught up to them. I guess this also would be a keeping conflict.
@Donna Salmiery you shouldn't let this upset you. There are unethical people all around us, just be thankful that they shared their little secret with you. Now, you know that they are not trustworthy. A snake in the grass is not a problem as long as you know that it's there.
I don't think they'll come out smelling like roses either. They've already been exposed for one fraudulent enterprise. It's just a matter of time before this scheme catches up to them. People who try to beat the system always end up fooling themselves more than anyone else. They are stepping over dollars to pick up dimes. Be thankful that you found out what they are made of this way and not after you partnered with them on a business deal.
@Robert Leonard I like the way you think!
Join the Largest Real Estate Investing Community
Basic membership is free, forever.