All Forum Posts by: James Likis

@Zeona McIntyre great points on solving problems and fears for landlords. My wife and I have long term rentals and are considering getting into STR arbitrage, and these are the types of solutions we thought we could propose to landlords -- given we know we'd like those ourselves!

Thank you for this breakdown @Simon Misiewicz. To the risks, we plan and hope to have a long term investment horizon. To the upfront costs concern, we're going to follow @Julio Gonzalez's advice and get in touch with a cost segregation specialist in our network to do a cost/benefit analysis. Thanks for letting me know you can provide an estimate, too, @Thomas Gorski.

@Michael Plaks Thank you for linking that thread. I was wondering about Myth 4: The sooner I do cost segregation, the better. There is nothing to lose. Are you able to use the passive losses that accrue on Form 8582 in future tax years to take a greater loss or offset profits on Schedule E? I am wondering if I do have a misunderstanding here, as I thought this was doable. 

To @Basit Siddiqi's question, I know there wouldn't be a benefit to our 2022 taxes: my wife and I are full time W2 and we already show a loss on Schedule E. My thinking was to capture the added losses that cost segregation and bonus depreciation would provide us now and use them in future years when I move out of full time W2 and into REPS to then count against my wife's W2 income (we file jointly). 

When filing our 2022 taxes, our CPA did not mention or encourage us to do a cost segregation study to capture bonus depreciation on the two properties my wife and I acquired in 2022. Our goal is to invest aggressively and, hopefully, allow me to step back from a full time W2 within 5 years while my wife continues on with her W2. At that point I’d plan to have real estate professional status. 

With this goal in mind, what are the tradeoffs of getting a cost segregation study done, amending our 2022 taxes, and capturing bonus depreciation? It’s feeling like a worthwhile move since we can put those added losses to work sooner than later given our goals and timeline. What are some arguments for and against? 

Thank you in advance for additional insights and perspectives!

Quote from @Jeff Copeland:

Is the seller free and clear, or do they have an existing mortgage to pay off? The seller can't sell you the house without paying off their existing mortgages and any other liens, so they'd need at least that much as a down payment, plus closing costs and commissions, just to walk away from the closing table with zero. 

And do you have a buyer's agent, or are you just concerned with the listing agent's commission?

It's important to understand how seller financing works, as well as how real estate agent commissions work on MLS-listed properties.

You are negotiating with the seller. 

The seller has already agreed to pay whatever % commission was agreed to in their listing agreement, so 1) it's too late to negotiate this (it has already been decided and agreed to in a written contract between the listing agent and the seller), and 2) it's not your concern as the buyer. 

Your concern as the buyer is making a realistic competitive offer. 100% seller financing is almost certainly not realistic or competitive. 

Thanks for the thoughtful response, Jeff. The existing mortgage is paid off. No buyers agent for me, just listing agent. I know this offer won't be the most competitive, but there are a variety of factors that are working in our favor: been on market for months, original offer fell through due to financing, doesn't qualify for FHA or VA, property is down the street from us, it's being sold because owner passed away. With all that, figure doesn't hurt to try and see if some of the benefits of seller financing appeal. 

Quote from @Brett Deas:

You can have the seller pay closing costs, or you can structure it so they get paid out of the cashflow on the property. I was an agent on a transaction where I got paid a few hundred bucks for a few months, was totally fine with it because a good agent should help their client no matter what.

 Thanks Brett, this was something I was thinking about, too. Glad to know this worked for you and could be a way to navigate this proposal.

Quote from @Bill B.:

Let me get this straight. You’re going to tell the seller of a $400k property. 

What I want you to do is give the realtors $24k and then I’ll buy it for say $1,900 a month at 4% for 30 years. So a year from now you’ll almost be even, unless of course I walk away. Maybe me and the realtor are in this together. Once you pay his commission out of your pocket I’ll fail to make any more payments on my zero down purchase?

Raising the price 3-6% with zero down does the seller no good. You’re still asking them to come out of pocket $30k or more with closing costs. What other offers are  you going to best with that?

I hear you Bill, hence my question of how to best structure a proposal. Sounds like you're saying the realtor fees need to be accounted for with a percentage down if the seller is opening to financing the rest.

Thanks Colin, that's a simple enough solution. I've been reading some other posts on this topic and also can see the benefits of not overthinking this, too, given the seller ultimately has to figure out how the realtor is paid. Thanks for chiming in!

@Lynn McGeein I figured 0% down seller financing would be something a realtor would argue against for their client. We are considering making a 0% down, seller financing offer right now. As a realtor, what would you recommend we include in our offer’s structure to account for the realtor getting paid their part?  Does anything stand out beyond going up from 0% down to a higher percent down so the realtor is paid at closing?

@AK Fowler curious to hear how this deal ended up. I am wondering the same thing about realtor fees with seller financing.