All Forum Posts by: Drake Espenlaub

@Natalie Kolodij All of the renovations are being done with intent to rent, I do not live at the property as it is/was not livable until maybe 2 weeks ago, still does not have hot water really no one could live there, it should be complete in the next month or so, but I do not intent to live there I intend to rent it as soon as it is completed. The entire place will be a rental, I will not be living there after it is all completed.  It was not marketed or advertised due to the fact it is not livable. 

Bought a duplex in May, it was to be owner occupied for a year, therefore it is my 'primary residence' however it needed much improvement. I have put about 25k of my own money into improvements, 10k in HVAC, 3k Windows, 4k flooring, for just some of the larger expenses. 

I also bought a 2004 explorer so I could have a vehicle to haul things for the project, future projects.

Question is any of this deductible this year given the fact I haven't generated any income ($0 from other rentals as well) in from this property? 

Thanks for the advice.

I feel each situation may differ, I would argue it depends on 1. Your employer 2. Your income 3. Your position. My example would be myself, I work for a public company that matches my roth contribution of 100% up to 6%. 

For me this has been roughly $3,500 combined with a 'free' $3,500 from the company, on top of being in the company stock plan which has went from $150 to low 400's in the last 5 years. The retirement account I have I am able to take a loan out on up to half, from what I read about the plan is that you potentially can use a penalty free withdraw on your home purchase if it has been invested for 5 years. 

I would say it is all relative. If you make enough money to save for a down payment by practicing frugality as Scott's book preaches, this shouldn't be something to lose much sleep over. I would also say for someone unable to save, this is a good option that forces you to. If you spend a year in the position and have 7k after year one, you could easily loan out $3,500 and FHA a 100k property. Or 203k an 60k forclosure and 40k of rehab.

In short I think if you are talking about being self employed then yes the $5,500 lump may mean more at that time. I would say someone with a steady job/income with a match plan is giving up free money, on top of what they are able to earn and save. The other thing to think about, and what I am researching is when you have enough property to eventually escape your job, you can take that roth and roll it into a self directed to avoid the tax on profit (I believe). 

In short, I believe it is relative to the situation you are in, if someone has a job that is matching a Roth, there is no way you shouldn't be putting the $100-$150 a check in that is getting matched imo.

I made the mistake of paying my last contractor half up front to start the job, and then giving him advances throughout. I was fortunate that for the most part he came back and finished the work, but I also did part of the work for him. Moving forward, and after discussion with him it is frustrating on his part when he goes to jobs and the material is all not there, he does not want to run to the store constantly and would rather be working, which I understand and made sure I had all the material there for him which I purchased. I think moving forward I would use him again and the others I will use I will take this approach.

1. Offer to have them make a list and you buy and gather all material to complete job, this allows you to have control over cost of the material on the project and know what exactly is being used. I also like this idea, because not always do I want to use the cheapest thing I will be having to replace if it is a rental. I want the option to use the better grade, or nicer finish.

2. Pay something to get them started. I realize most contractors bid by job. In this example lets say they bid $1,000 to complete the job in 1 week, you supply material. I will pay them $30 an hour at the end of each day for the hours they have worked. If the job is completed and the full $1,000 has not been paid you will receive the rest. (This should be noted this is how I will do with my handyman, or odd job guys).

3. Make a list, then make another list. I create a scope of work before they bid the job, I write down what I am willing to pay -10% (which they do not know I subtract that %) and am willing to pay anything close to that. I have a fair understanding of how long something should take and feel comfortable doing this. What I did on my last list is would write the line item *new drywall to be installed in all rooms* - 32 man hours @ $22/ hour ~ $704. This allows me to create a budget while supplying them with my expectation. Rarely are they going to tell me when I am high, but like I said I am comfortable with my numbers when I do this and am not worried if they finish it in 25 hours, good for them, it is hard work and they deserve to be compensated if it is completed ahead of schedule. 

4. Retainer for punch list. I will withhold the last x amount for them to complete the punch list. I set the expectation the job site should be in the same shape it was when they arrived, and any patching or "tightening" left to do be done. It is common to grab a roll of blue painters tape and tear a 1" piece off to spot fouls that need to be fixed in the industry. That being said, I wouldn't go crazy on the punch but just point out the major areas of defect. 

I have a blog post about this, and purchasing a homepath property. I would plan for it to take you 6 months to a year for every 10k in debt. Unless you have a job that is paying more than 60k a year and low living expenses. You have to find you competitive advantage, grind and make money however you can.

He does not have a mortgage, the home is paid off in cash. So essentially they go to court foreclose, he is still responsible to collect and they can just tell him to screw off, not much he can do. Thanks for the opinions. 

I work with a friendly guy from Australia that bought some inexpensive homes before he came over. He is aware I have my real estate license and dabble in properties, he asked me to look over a contract. After advising him I am not a lawyer and he should seek legal advice, I told him I would post this just to see what anyone thought.

This is a line in the contract from the sale to a wholeseller. They offered him 500.00 deposit, $200.00/mo with a balloon payment of 22k by march of 2018. They are now offering him to take the property back. He keeps all funds takes the property back, and they move on. While he is holding their feet to the fire on the balloon payment, and they will essentially be stuck with the property, as it is in an area where homes typically wont sell. He will have made a solid profit it it holds.

I was looking for a clause in the contract which allows them to escape and this is the line that jumped out at me. Do you think this line allows them to exit said contract and not be liable for the balloon payment, or would he have a case in court if he went forward given they dont pay.

7. DEFAULT: If buyer shall default on its obligations hereunder and suit is brought to either enfore or terminate this contract, the parties agree that buyer has made a substantial down payment requiring judicial foreclosure of this contract.

Can someone dumb that line down for me?

Once I leave said company, is it then possible to take those funds and put them in a self directed IRA, or once in a 401k must stay in 401k? Also the 401k I have is a roth IRA.

I currently have an IRA with the company I am employed with through fidelity, invested in the company stock. I have been using a loan strategy on it to purchase and rehab my properties. Is it possible to switch the rest of the funds into a self directed IRA as I can only access half at a time. As far as closing the account, it is not possible until I leave the company. Part 2, is there any tax advantage for me doing self directed as opposed to just continue to do the loan program they offer.

Try using solo on your doors and trim. Superpaint is not designed for that application.