All Forum Posts by: Bill B.

Stand pat…

90% chance that either…

You are already the high bid (20%?) or you can’t afford to match what will be the highest bid (60%?). 

You didn’t say how much you asked for in sellers concessions. But the sellers literally don’t care if you choose between raising your offer $5k or ask for $5k less in concessions. Oh closing day they will be affected the same. In fact if they are smart lower concessions are smarter as it avoids the problem of not appraising. 

The fact they waited 4 days means either it took that long to get one more offer, or they were getting offers every day. Probably no reason to do much in either case. You can certainly toss more money at the problem if it will pay for itself by moving out of your current situation sooner. Otherwise I’d keep looking. 

@chris 

@Chris Breaton No. It can't be in a LLC, but that shouldn't matter. There's no reason to purchase the 1/4th primary 3/4ths rental in an LLC. There's no upside, only downside. You don't get anonymity, liability protection, or tax advantages. What you get is more expensive debt and tax prep for no reason.

Personally I moved primary to primary 5 years in a row renting out my previous home. I didn't do it for the lower down payment. (I still put down 20% to avoid PMI.). I did it to save almost a full percentage point in interest. This alone could be worth $4k/year ($330/mo) for the life of the loan. Do it 4x in a row and you've got an extra $16k/yr coming. Better than owning an extra property.

Why are people suddenly talking about people who are under water on their mortgages when it seems most states have lower numbers than they did in Q1 2024? I don’t remember anyone talking about it back then when it was “worse” heck I don’t remember anyone talking about it in 2019 when it was almost 3 times worse  (6%+ instead of 2 something.) 

• The problem specifies usingATTOMATTOMDataDataSolutions′Solutions′Q3Q320192019USUSHomeHomeEquityEquityand UnderwaterUnderwaterReportReport.
Step 2 . Extract the percentage of seriously underwater mortgages
• According to the report, 6.5%6.5%of mortgaged properties were considered seriously underwater in Q3Q320192019.

https://www.attomdata.com/news/most-recent/seriously-underwa...

You don't have to sell if you’re underwater.  Why would you sell if it’s going to wreck your credit and the replacement will have a higher payment for a cheaper place. Yes. People still get divorced, married, have kids, move for jobs. But none of that is being forced by being underwater. Are ANY of the people predicting large numbers of sellers considering selling their own properties right now? Or do they think only other people are too dumb not to wait for better prices?  

I think the average BP member might be in a better financial position than the average American. They don’t realize the financial impact of waiting a year just to get another $20k of their home is to some people. 

Unfortunately for your plan, duplexes and quad plexes are the same as SFR in a bank's eyes. If you can't borrow for SFR you can't borrow for SFR.

You can look at DSCR which will require a lot of cash to work or you can look at 5+ units. That's the point where commercial financing kicks in.

Some people have reported success in the 5-12 units space.  Just big enough for the bad financing but too small for economies of scale to kick in. But you need the discount a lack of buyers provides. Personally I much prefer the quadplex or even the duplex for the same reason. You’ll have a boatload more buyers if you ever want to sell. And they won’t all be investors looking for the best deal. So you may have to find a partner with a job or a local bank/credit union willing to take a chance on you. Try asking the bank about financing on the four plex if you moved in and made it your primary, that should be the easiest financing. If that doesn’t work almost nothing will.

NP. Keep the email, invoice, or written state,ent from the broker if you like his number, he’s an “expert” you relied on if questioned by the IRS. If you don’t like his number get an appraisal from someone who agrees before you hire them to give you a current and 2 years ago value. Again, he’s the “expert” you relied on when filing your taxes. What more can the IRS ask for. 

The “lazy” susceptible to audit, but I’m sure it’s done all the time way. Would be to look at the tax assed value today and the tax assed value 2 years ago. Calculate the increased value percentage. And rely on the county as your “expert” tot he IRS. Good luck. 

And yet 90% + do not know all the laws that affect their property. And certainly don’t know them the day they are passed or even go in to effect. So their choices are “spend” their personal time becoming an “expert”,  spend when they screw up, or pay to hire an expert, either a PM or a lawyer. Because you going to outsource it if you aren’t a lawyer. Hopefully not to Google. 

“Stupid” little changes go in effect all the time. We’ve had changes like when rent is late and what can be charged for as “wear and tear” in the last year. These weren’t on the news or in the newspaper. I’m sure 100’s of new laws affecting us are passed yearly that we don’t know about until it affects us  directly.   

Maybe every time the city, state and federal government passes new laws they should be forced to print “summaries” on their website, or email/mail everyone affected by it. But. As has often been stated. They can only control criminals, so make everyone a criminal in some small way  

Plus the other two reasons are reason enough. :-). And that’s before you place ANY value on what your time is worth. 

Can you be bothered to keep up on federal, state, and local law changes in regards to notice periods, late fee limits, both time and amount, security deposit laws, application fee limits? Do you know of you have to accept the first qualified tenant, or the amount you can increase rents?

Do you know the exact market rent so you don’t sit vacant if overpriced or rent it too cheaply? Things that can easily cost more than the 8% I’m charged. Do you have the time and personality to meet applicants and screen them?

Are you large enough to have relationships with vendors when you get a “Your house is flooding…” call at 2am that they’ll send someone out. Do you have the time and personality to enforce late fees and start evictions as soon as possible?

If you fall short in any of these categories once a year you could lose more than a PM charges. Then you’re virtually paying to PLAY PM. If you have 25-50+ units and want to start your own PM company great. You’ve admitted it needs to be its own business. 

True, I only have 12 properties and PM services cost me about $20k/yr. But I work 30-60 minutes a month, if you count 20-30 minutes of bookkeeping. If I decided tonight to go on a 6 month cruise it wouldn’t affect my income in the least. I owned some franchise computer stores back in the day. And there were plenty of franchise owners trying to buy themselves or their kids jobs. If you’re poor or bored, go for it. It’s basically a part time job that pays $5-$20k/yr before taxes. (I know, you’re thinking you don’t have to pay taxes on that money saved. But. You don’t get to deduct that money from your income. So living in Vegas that $20k costs me $16k. It might cost someone in California only $10k/yr for a dozen properties. That’s what you’re “earning” for doing it yourself. 

Maybe you’re better off putting in some overtime and your real job. Or spending that time finding one more deal every year. Good luck either way. 

The day your husband inherited the property the value that day became his “stepped up basis”. The only taxes you would owe is on the value the property increased from 2023-2025, minus the cost of selling. Most likely nearly zero. I don’t think the local appraiser is going to call the county and tell them to raise your taxes. If you plan to sell, you don’t really care. It will be sold before the taxes increase. 

That appraiser might be able to also tell you what the property was worth 2 years ago. Otherwise same story with the broker you choose. I don’t know if I’d bother with an appraiser as opposed to just a broker. But if you do. Ask them both, what’s it worth today, what was it worth 2 years ago?  That minus all selling costs is all you owe taxes on. 

Ps. If through some weird fluke teh 2 year difference is a huge number you could do a 1031 for just that increased amount, but I doubt that’s the case unless this is at least a $2-3M  property. 

You said you’ve “been flipping houses for 12 months.”  Not too hard to determine if you’re a real estate investor or a flipper. You sure think you’re a flipper, are you asking the IRS to prove you wrong?

Expect to pay self employment tax and switch to a more real estate focused CPA. It’s going to cost you at more in taxes today but it’s going to avoid penalties and interest when they catch on. 

In the future try putting a renter in the property for at least a year after rehab before selling. This will let you attempt to claim capital gains taxes if it doesn’t become a pattern with obvious intent. Or better yet try live in flips where you live the property for 2 years as you flip it and pay zero taxes. 

Ps. Did you own and of  these properties over a year? If not then they are obviously short term capital gains or regular income. 

@Marc Winter @Account Closed (There’s two of you for some reason so didn’t know which to reply to.)

No it goes towards the purchase. It only kicks in if the “buyer” fails to buy. They are supposedly offering cash because they are sooo confident about the fact they’re going to close. It costs them literally nothing if they do close. It prevents wholesalers and “Re-traders” from taking your property off the market and stealing the time it’s worth the most, the first weeks it’s listed. 
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The seller has “all” the leverage before it goes under contract. The buyer has “all” the leverage after rewards. This gives the seller a TINY about of reverse leverage and covers some if not all of the loses from taking the property off the market. 
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Ps. Please make sure your realtor puts “accepting backup offers” once you are under contract. There is no greater leverage for the seller when they are asked to re-trade than telling the buyer to please cancel their offer. Because you have another one you want to go with instead.