All Forum Posts by: Carl Millsap

@Tracey Lane consult your tax advisor.  I'm not a tax professional but I've run similar scenarios through my advisors and here is the considerations:

1. You would have to count the rent as income on the other side of the equation. The S-Corp will get the deduction, but you and your parents will have to count that rent as income personally potentially offsetting deductions that pass through to you at the end of the year from the S-Corp.

2. If it's an income producing property will you have to pay County and City taxes because it's a rental property? 

3. If you write off expenses i.e. depreciation because it's a rental you may have to recapture that depreciation when / if you ever sell. 

Hope this helps.

@Sunny A. write a memorandum to the tenants noting the observation of the cat in their unit, and the specific clause it violates in the lease. In the memorandum give them two options to cure the issue:

1. Remove the cat by X date...

2. Pay a monthly pet fee in the amount of X by date.

They have until x date to reply to the notice in writing of the option they're selecting.

If they take option 1 the next time you see the cat or any pet give them notice of the violation and start the eviction process. 

If they take option 2 do a lease modification stating its for one cat, have them submit a picture of the cat so you can have it in your file.

Ensure you comply with all laws, and put everything in writing. Also consider the cost of eviction, vacancy and re-leasing the unit when taking any adverse action against tenants. 

We have a clause that states unauthorized pets results in a $1,000 fee for damage, cleaning etc.  

Good luck.

@Scott Grimes It'll be investor dependent. 

My question for you...what is your time worth?

I'd venture to say most investors like you will rarely if ever access it, but for the small percentage of investors who want access to the information it'll save you time.

As you consider software don't look at where you are now, look down the road. Will an owner's portal be beneficial when you have 200, 250, 300 doors under management? Will your time be more valuable at that time vs. now?

 Investors or accidental landlords hire a PM because they don't want to deal with the day to day. If they have less than 5 doors more than likely the only time an owner will have an issue is:

1. Their check doesn't deposit in a timely fashion.

2. The property is vacant for a long period of time.

3. Turn-over expense / repair bills seem excessive.

When I had 1 door the above were my concerns, an owner's portal wouldn't give me the answers so I still had to speak with the PM.   The good thing with most of the software companies Appfolio, Rent manager, Rent Vine, etc. is the cost changes as you grow. 

Begin with the end in mind.....

@Tony Huynh I'm not a lawyer but I did stay at a Holiday Inn Express....I would simply document your policy change and ensure every tenant from this point forward goes through the same process until you find you need to improve the process. 

1. Write down your screening criteria. Ensure it complies with ALL laws. You can check with local PM companies to see what criteria they use. Consult a laawyer if necessary to ensure your criteria is legal.

2. Whenever you have someone inquire ensure you tell them the criteria, then follow and enforce it.

As for this tenant you've already explained why you did the background check; document the conversation and leave it alone. There is no need to try and convince him that  didn't discriminate against him. 

You had a policy change before he applied that's it. Businesses change policies all the time, you run a business and you're allowed to improve your processes. 

Sure, when you close on the SF Foreclosure refinance it once you have it ready to rent or whatever you plan to do with it. I can't imagine a bank declining to loan against it. 

@Ryan Overcash first Kudos for quitting the job to chase what you really want. 

1. What is the cost difference in rent and your mortgage if you go back to having roommates at the house?

2. What can you do to lower the cost of living?

3. Can you get a HELOC to access some of the money w/o selling?

4. What lead gen. strategies can you do for free? Join a mastermind that has professionals that compliment RE selling . I was in a mastermind with an ADT rep, a mortgage broker, etc. We fed each other business w/o competing against each other.

Rents have increased significantly; I'm not a fan of taking short term money (selling for the lump sum) vs. the long term money (appreciation, rent payments). If you can lower your cost of living by taking in a roommate then I'd seriously consider / go back to that strategy. 

What is the plan to get 2 transactions per month? What other areas can you generate revenue as an agent? Are you working with investors or first time home buyers? 

@Andrew C.   If that total is labor and materials then it's probably not to far off. Depends if they used in house maintenance or contracted it out for labor. 

Materials are out of hand. A box of LVT I was buying at $40 a box last year is now $87. Crazy!!

When I had a property manager (PM) I asked for three quotes for turns.

My PM at the time was using her husband's company which I thought should've been disclosed. Of course his quote came in the lowest every time . I called and arranged for 3 contractors to look at the unit w/o her. I saved $3K on a turn by doing that. 

Consider most PM don't make a lot of money from management fees; not saying that's a license to pad cost elsewhere, just an observation. 

Hopefully the increase in rent will shorten the time to breakeven on those expenses.

@Wee Pone Yang-Chang Congrats on taking action. It's natural to have cold feet especially after seeing the inspection report. 

Some things to consider not just for this deal, but other deals as well....

1. You said "once fully rented"....is it ready to rent? how much is it going to take to get it ready to rent? Do you have the cash on hand to complete renovations?

2. Look into buying a home warranty from a credible company. This option would / could help when the HVAC units go out. You would pay a deductible and some expenses not covered by the warranty but not the full expense of replacing the units. You can ask the seller to cover this expense at closing.

3. In 20 years, I've only had one major water line break. Not saying the water lines on this 100 year old property won't break but it's not a common thing. Depending on area, some water companies offer insurance on water lines. Something to consider / look into.

4. Get a quote for window replacement. Can you do it in pairs over time or would they all need replacing soon to prevent tenants from having high utility bills? Given that the windows are old and HVAC systems are old I imagine the utility bills are high already. I could be wrong.

If I'm starting out I would pass on this and find something newer, more modern. I don't know your area, 100 year old properties may be common but I have to believe you can get a better bang for you $ without the hassles of a 100 year old property.

Good luck!

@Elijah Faas Congrats on your first purchase. As for this deal, a couple things to consider.

1. Do you have the reserves necessary or access to $ for your current duplex if issues arise?

2. Did you factor the downpayment $ financed by the seller into your payment? That lowers the cashflow significantly if you took that option. 

3. Have you done anything to look for other deals? Driving for dollars....I'm sure if you spent some time looking for deals, you may find a better one. 

4. I recommend you pass for the following reasons:

a. you don't have the cash to handle an emergency..i.e. HVAC system goes out, roof, hot water heater replacement.

b. The house is overpriced.

c. Who finances a property at a lower interest rate than a bank? In theory the owner is making money at 4.75% instead of letting the money sit in the bank, but when you factor the tax implications it'd be a break-even at best. Check w/ a few hard money lenders to see what their rates currently are for comparison.

All "deals" aren't deals. Walk away from this one, get your financial position on a good foundation then buy your next deal. 

Good luck!

@Samuel eddinger, @Joe Norman, @Andrew freed, @Michael Smythe thanks for your response, I will look into these resources. I have a demo with Rent Manager today. 

Thanks again.

Carl