All Forum Posts by: Deborah Drexler

The tax rules are complicated and ever changing but the statement "if you use the property for more than 14 personal days per year you cannot deduct anything" is incorrect.  

My stab at an accurate statement would be this:  if you use your investment property for personal use LESS than the greater of "14 days or 10% of the number days it was rented during the year"  then it is still considered to be an investment property not a personal residence.  In this case you can deduct business expenses as usual.  

If you use the investment property for personal use MORE than the greater of "14 days or 10% of the number days it was rented during the year," then you need to prorate the expenses between investment expenses (deductible) and personal expenses (nondeductible).

Note that there are complicated rules about what constitutes "personal use."  For example, if you let your mother stay there rent free for a weekend, those days are considered "personal use,"  as are any days you rent at less than fair market value. 

Finally, if you have a vacation home but you rent it for fewer than 15 days per year, you don't have to report the income, but the property is treated for tax purposes as your home, not an investment.

Please note that I am not an accountant and nor tax expert, and while I am an attorney, I cannot provide specific legal advice to you in this forum.  Please do your own due diligence and consult with a tax expert.  And as a first step, read IRS publication 527.

One more thing:  I owned a condo near Loon Mountain for many years.  I thought it was the perfect location:  only 2 hours from boston, and rentable three seasons of the year (summer, fall and winter). 

Deb Drexler
  

Another poster said to report him to Building Department, and yes that is also a great idea.  Note that Boston building permits are available online -- before calling, you might want to search the online database to verify whether and what permits were pulled.  

Unfortunately for your situation, the Boston housing ordinance prohibits only 5 or more unrelated persons from living in one apartment.   I'm not sure if I can post the link here -- message me and I can send you an article about this.  or just search "number of unrelated persons in an apartment in Boston." 

Even more significantly:  note the 2013 case of City of Worcester v. College Hill Properties, where the highest Massachusetts court held that renting to 4 or more students in one apartment unit of a two and three family home does not turn it into a“lodging house” requiring a special license under the Massachusetts lodging housing law, provided that the apartment meets all other sanitary and building code square footage occupancy thresholds. The state code requires 150 s.f. of living space for the first occupancy and 100 s.f. for each additional person (3 occupants = 350 s.f. of living space), and 70 s.f. of bedroom space for the 1st person, plus 50 s.f. for additional person (120 s.f. for 2 persons in one bedroom).   

Some people believe that the College Hill Properties case will cause the Boston roommate-limiting ordinance to be invalidated if it is challenged in court.  On the theory that as long as you meet the sanitary and building square footage requirements, you can have unlimited numbers of unrelated people living together. 

All that aside, if I were in your shoes I'd touch base with the fire department.  I believe that every sleeping room has to have at least 2 accessible means of egress (i.e., windows need to be a certain size), and if he's putting up a lot of walls, that may be hard to achieve. 

Deb Drexler

Young professionals have to live where the professional jobs are.  Boston has a wealth of professional jobs: health care, higher ed, technology, pharma, finance, insurance, etc.  Because of this, young professionals will stay in the Boston area.  

One way that millennials can save on rent is to move to the outer suburbs. In general, the farther out you go, the lower the rents.  But the commuting costs -- both in time and money -- add up.  I think young professionals will continue to pay the high city rents in exchange for convenience and better quality of life. 

One more note:  rent levels are a function of supply and demand -- rents will go down as more rental units become available.  In theory at least.  There has been a building boom going on in Boston over the last decade, and new rental buildings are everywhere, but so far I haven't seen any appreciable difference in rent levels.  That to me indicates a huge level of unsatisfied pent-up demand. 

Where is the flip located? 

I keep hearing people say on BP that property is considered "inventory" when it is bought and sold by a  house flipper.   The corollary to that is that one must report the value of beginning and ending inventories on one's Form 1120 and must track "cost of goods sold." 

Something about that didn't seem right to me.  As a lawyer (but neither a health care nor tax lawyer, so I may very well be in over my head) I took a look at tax court cases and found a consistent theme:  courts holding that real property is never considered to be "merchandise" and thus cannot be inventory.  The leading case on this is Homes by Ayres v. Commissioner, 795 F.2d 832 (9th Cir. 1986).   As far as I can see this case has never been overturned and the principle still stands. 

So it seems to me that what a flipper should do is capitalize all costs related to each parcel of real property, adding it to the parcel's basis, and thus recovering the value of these costs upon sale of the property.  (And of course any gain is taxed as ordinary income).  I believe that this achieves basically the same result as treating real property as "inventory," is easier, and to me makes a lot more sense. 

Anyone want to comment on this? 

it has two chimneys and yes we are pretty sure we are going to remove them to facilitate a more open floor plan.  then we'll need to find a roofer to patch the two resulting holes.   however, none of that is in the budget.  

Our budget is $200K for a 2194 sf two family house renovation.  We are leaving the existing room and are putting 2 full baths in each unit, but otherwise scope is similar (new siding, new plumbing, 2 new kitchens, existing wiring, 25 new windows, no structural work).    

I will say though that we budgeted $20K for plumbing and my plumber just gave me a ballpark estimate of $35K, so there's that.  We're just in the demo phase, so we'll see how it goes. 

Hi I am looking for hard money for a deal I am doing in Norfolk County.  The house will not qualify for conventional financing.   I will be putting down 50% of the asking price.  

There are so many Hard Money Lenders out there, I don't know how to choose.  

Has anyone had experience (good or bad) with any of the following: 

• Universal Capital
• Summit Capital Management'
• Sky Capital
• Accolend
• York Funding
• Capital 360
• Sachem Capital Corporation?  

I would love to hear about the experiences  BP members have had with any of these. 

Thanks.