All Forum Posts by: Doug McVinua

One of my clients in Arizona is considering do a Cash Out Refinance on a 4-Plex (Investment Property). The client plans to use the funds from the cash out refinance to pay off his personal residence.

Will this scenario create any tax issues for my client?  

I was concerned that he would be converting funds from his investment property to personal and it could trigger a tax event on the converted funds.

Thanks for any thoughts any of you have!!!

@JakeMiller It reads as if they are going to try and push you around by paying the February rent. Be cautious regarding accepting any rent for February, check with legal. Andy Hull mentioned above is a solid recommendation.

@Jennifer Lynn Lewis This tenant should be evicted immediately! Doctor Evictor (Phoenix law firm) would be my recommendation. Dr. Evictor is quick, efficient and does lots of evictions.

Tenant management is one of the skills of a professional property manager that starts with the application process. Hire a professional to manage the property, screen the applicants, put in place the proper paperwork and then execute the plan. 

As a property manager, this situation would have changed months ago!

Take action now, it's not likely to get better. Properties are in demand, let's find a respectful, paying tenant.

@Account Closed Yes, you should be able to use FHA on your next purchase, even a 4-Plex.

I would connect with a good local lender (glad to provide a referral) to confirm your buying power. Moving out of the one you are in may or may not create a liability for the payment at move out, that will be one of the tricky points to maneuver. Once it's a full-time rental and seasoned the rental income will be an offset, the question will be can they use that now.

Great plan!!!!!!!!!!

I like East Mesa, the area around the airport (Mesa Gateway) should explode with jobs over the next few years. 

Those jobs and the road improvements (freeways) are going to really change Queen Creek and San Tan Valley also.

Casa Grande should have a bright future as well, maybe even Coolidge.

@Scott France I would also consider some estate planning with legal and tax experts so dad is protected in that regard. Hopefully, all of that is a long ways off but it doesn't hurt to plan.

My father-in-law went into a nursing home and it was over $6000.00 per month out of pocket. It didn't take long to burn through his cash that he had hoped would be willed to his family members. 

@Chris Meunier Selling Rental B and taking the Tax Exemption seems to be logical at face value. I would check with an accountant/tax expert (that's not me) and clarify the gains exemption.

Once liquid maybe you then invest in a market like Phoenix, AZ where you can buy solid rentals for under $200,000 all day long. Have the property managed by a professional as an out of state investor and you are good to go again with a reason (deduction) to visit a nice warm spot once in a while.

@Michael Capizzi Unfortunately the experience you had is not the first nor will it be the last. Contracts of this nature are extremely one-sided and should be reviewed very cautiously.

With that said, the wholesalers do purchase properties in the Valley, it often pains me to see the money left on the table by a desperate seller but sometimes it works out for everyone.

Why not go a more traditional path and get closer to retail value?

@Kyle Seidel Phoenix is a good furnished rental market. @Stone Jin has provided solid input, the rates are very seasonal in Phoenix. Summer months are often a time that vacancy rates are high in that sector.

One nice single family, I manage the owners use for a couple months out of the year and we rent it when they don't want to use the property. It has a pool so we are able to find summer month tenants at a reduced rate. Of course, we provide full landscaping, pool service etc for the property year around (For less than 18%).

For many owners, the numbers are OK for furnished rentals, especially if you want to also use the property. For others, the hassle of furnishing the property and the higher costs of operating drive them to a more traditional long-term rental situation. The long-term gets them in the market, gives them a reason (write-off) to visit the valley and one day they may even convert a property or multiple into something they live in.

What is your reason for this investment?

@Jake Kain The exemption is very clear in Arizona when a person is managing their own properties, however managing a property for others generally requires a license. The penalty for crossing the line can be a felony and as such, I would suggest you contact an AZ attorney that deals with real estate law to be clear that what you desire is actually legal.

The Department of Real Estate has frequently directed unlicensed property management to the Attorney General for cease and desist action as well as other actions, none of which you want to be a part of.

You can do all of the property work at Grandmas house, prepare it carefully so that she can achieve maximum rent etc. with no issue.

We offer lease up as well as management and sometimes that is a more affordable path that gets everyone started on the proper path with all correct forms, leases etc.