All Forum Posts by: David A Lisowski

Can't the prospective tenant just put the 1 year of rent in an account and just pay you like normal?

You can at least ask why they are wanting/willing to pay upfront like that.

As others have said, I would also say, "No."

House hacking works on the first, maybe, second, but after that, you should only have tenants.

Friends as roommates will cease to be friends. Friends as tenants will cease to be friends.

Friends as business partners (providing a service) will neither remain friends nor partners (and probably won't really provide the service).

Networking, sure. Being friendly, most definitely.

Mixing friends/family with business, no go.

Inventory will catch up with demand.

The craziness of 10 second offers and 50% over ask price are done. Those scenarios seemed to be in all markets.

The market (all markets) will normalize. Values will plateau. Some markets may see a dip, but nothing substantial.

Lending and borrowing may slow down due to rates, but experienced investors will still be able to borrow and continue transactions.

Primary markets may slow substantially, and the rate increase is more likely to push borrowers out of this market due to affordability (probably more so than the crazy market recently that required ridiculous amounts of over-ask, etc.).

Days on market will probably increase which will ease pressure and give some negotiation power back to buyers.

ROI expectations will need to be tempered.

But doomsday it is not.

I would also not sit around waiting for a crash and expecting a repeat of 2007/2008. No one wants to lose equity after a purchase, and no one wants to get saddled with expenses that cannot be paid. And certainly no one wants both on the same property!

But keep doing what you are doing, just do it better.

@Mike Hern

Quite literally from the CFPB, but maybe there's something more recent:

https://www.consumerfinance.gov/ask-cfpb/what-is-a-demand-feature-what-does-it-mean-if-the-demand-feature-is-checked-off-on-my-closing-disclosure-en-1997/

"What is a demand feature? What does it mean if the demand feature is checked off on my Closing Disclosure?

The Closing Disclosure has a statement that reads "Your loan has a demand feature," which is checked "yes" or "no." A demand feature permits the lender to require early repayment of the loan.

If the demand feature is checked "yes," the lender can require that you immediately pay the entire loan balance (principal and interest) at any time. The lender can make this demand on you for any reason or for no reason. Be sure to check your Closing Disclosure and promissory note for any demand features. Think carefully about whether you want to agree to a demand feature."

@Ryan Taylor

I think you mean "due on demand."

The loan will always be due on sale of the loan is secured to the property.

If you mean due on demand feature, that's not how loans work. It closes with a lender/ broker and usually gets sold to the secondary market either individually or in bulk (with other loans).

Brokers make money when the lender funds the loan at closing.

Lenders (the people who fund the transaction, even if just temporarily) make their money when the loan is sold to an investor or secondary market. Sometimes the lender is the investor, but that doesn't mean they service the loan (or will even buy it necessarily).

The terms of the loan cannot change once you sign the closing documents. The only way the terms can change is with a new loan (unless there's a adjustable feature, but that should already be laid out in the loan terms).

If there is paperwork in the closing documents that state the note holder (lender, servicer, etc.) can execute due on demand, it's typically based off of the occupancy and/or type of loan.

For example, if you purchase the home as a primary or secondary in order to try and get a better interest rate, and then are listing the house on a rental website, it might get called due since it is being used as an investment.

Then again, there is no requirement for calling a note due if "due on demand" is part of the loan. It can be called for any reason or no reason. So they don't have to "catch" anything or be notified if the loan has the on demand clause.

More here:

https://www.consumerfinance.gov/ask-cfpb/what-is-a-demand-feature-what-does-it-mean-if-the-demand-feature-is-checked-off-on-my-closing-disclosure-en-1997/

Appreciation is nice, but that's prospecting.

Cash flow provides income.

Income generating properties are more desirable.

Cash flow/income can be used to qualify in other deals, used to pay down debt faster, or saved for the next investment.

Well-run/managed properties that cash-flow will increase your appeal to potential investors for future deals.

I don't have data available, but I would say no. Foreclosures are not on the rise in my area.

@Nathan G.

Your post was more clear.

I would expect, as an individual, the IRS is specific on what can be filed. The Schedule E is specific, and any "other" expenses would be listed on a separate statement.

Supplies are a specific line. So sure, materials for rehab/renovation can be lumped under supplies.

But something like a $20,000 new roof would have to be depreciated.

The Schedule E also has a location for "number of days of personal use" and "number of days of fair rent" (or something like that, I can recall right now).

Money follows the deal

@Sam D.

Large expenses can be amortized and depreciated for tax purposes, but nothing is a direct 1:1, as far as I know.

Like you can't go spend $2,000 on repairs and just get $2,000 in tax write-offs. Not as an individual anyway.

But I'm no expert so someone else might chime in with better advice.