All Forum Posts by: Buddy Holmes

@Brandon Hall, would you please check me on @Daniel Vieyra's question?

Thanks, Buddy

Hello @Daniel Vieyra, welcome to BP.  I am sure you will get good advice from the many CPA's on this site but my thought is

that you only need what your benefactor originally paid for the property, when he bought it, and tax roles or other means of evauluating the land and improvement ratio at the time he bought it.  Even if he did not use the depreciation over the years, the IRS calculates remaining depreciation as if he did.  Once you determine the improved property cost when it was obtained, divide by 27.5 years and reduce the original basis by that amount each year since it was obtained.

My only concern is to make sure you must use this basis on a gifted property. On an inherited property you start fresh with current values.

Cheers, Buddy

Hello @Michael Orr, welcome to BP.  I lived in Northville before heading for warmer winters.

If you have a tenant who will share a SFR with you, I would say that would work in the beginning. You can get the FHA loan and if the numbers work with both situations then go for it. By both situations I mean 1) with your tenant sharing the first year or so and you doing the property management(PM)/landlord chores; and 2) once you decide to move on run the numbers on having a PM and a whole house tenant at the going rate. If both of these calculations show cash flow then great. For the first calculation don't forget to factor in what you are paying in current rent.

I personally would not try to rent out the home two shared tenants in the second situation.  But others may have more experience in home share rentals.

This is a great place to get advice thought.  Good Luck!

Cheers, Buddy

Thanks @Taylor Brugna!  Have you experienced the IRS using this against the Real Estate Professional classification for >750 hrs?

They get their "20%" back when they close. I don't see it as a lease to own, in that they end owner found the property, contributed most of the DP and will own the house they picked out once there credit is cleared. I just used my credit to help them for a reasonable return. Their "Occupancy Agreement" is a NNN lease in between.

Cheers, Buddy

I am new to BP and listening to the podcast from the very beginning. I posted this idea under the wrong topic previously and thought I would try again under this forum. I had just finished with podcast show 004 with @Frank Gallinelli. His discussion of Triple Net commercial property came from a different perspective than my earlier understanding of CVS, Walgreens, etc. I suddenly realized that a good deal my RE Broker came to me last summer with, is in fact a Triple Net SFR Investment! Has anyone else had one of these? The back ground is that my RE Broker is the host a local RE radio show. A couple came to him with their problem of having a short sale on their credit report. They had found a FSBO property with some acreage (they had horses) and asked him how they they could buy it.

He put them in touch with his (now mine as well) mortgage broker to discuss. Both these RE and Mortgage Brokers are "out side the box" thinkers. The Mortgage Broker told the couple that they were financially set to buy the new property but they needed to wait three years for their credit to clear before they could qualify for a loan. However, once they were clear they could get a great deal on Department of Agriculture Loan or a FHA loan with as little as 3.5% down on this property.

With the family's approval, the two brokers got together and came up with what is in fact a NNN Investment deal on a 5 acre horse farm and home.

The deal was offered to me. After some back and forth negotiations once the first sales price set,

the following terms were agreed to:

I would buy the property on a 20% DP conventional mortgage (My RE and $ Brokers both win)

The future Owners place a nearly 20% cash deposit on a signed Sales Agreement to buy the property in 36-48 months for a price that allowed some modest appreciation and escalates a bit after the 36th month for incentive to close.

The family signs an Occupancy Contract (not a lease or rental agreement) which sets the monthly fee (rent) to be $150 over the cost of Mortgage, Taxes and Insurance. In addition the contract specifies that they are responsible for all maintenance and repairs and compliance with local regulations. They are able to add improvements (it needed a horse corral (yard) with fence, etc as long as they did not involve anything with might lower property value. Nearly through the first year and the deal is working like clock work.

I see this a Win-Win for all involved. The family got a beautiful brick completely new rehab (roof, HVAC, flooring, cabinets, baths, kitchen, appliances.. as well as their horse farm in a quiet setting. I am getting a good CAP and will get a good ROI in another couple of years. My two brokers got their fees.

Any one else have experience in this type of an Investment?

Cheers, Buddy

Thanks @Lance Lvovsky. Not really saying I am going to use Turbo tax for my return. Just saying go thru a version of TT did not find any election for it. My Question is just to start a discussion on the pros and cons of such an election and the IRS requirements for the option of "Real Estate Professional". I have worked with one CPA and I am looking for another CPA with more knowledge in REI.

Cheers,

Buddy 

I understand from other discussions here on BP, that the IRS may have very stringent requirements for REI's claiming Professional Status to enable RE losses in excess of $25,000 per year against non passive income.

One suggestion, in addition to detailed records of the over 750 hours of RE activity, is the "Election" of combining of all your RE properties into a single entity.

I have not found a way to do this in Turbo Tax (no chuckles please).

Does anyone have experience with this and discuss the pros and cons of such an "election."

Cheers,

Buddy

@George Blower, Thanks for the very complete answer!  You made it very clear.

@Steven Hamilton II, 

So that is 5 years from the original opening of the Roth IRA or...?

Cheers, Buddy