All Forum Posts by: James Mc Ree

It is considered interest income and taxed as regular income.  It is passive, but not combined with rental income.

It might help in your conversation with your father-in-law to understand his interests.  You are out of luck refinancing with him if he just needs his capital back.  He may be willing to consider it if he needs a good, steady bond-like income (interest).  A 5% bond-like return is pretty good for a portfolio, if that is what he is looking for.

Alternatively, he may only need some capital back right now.  You might be able to agree to a payoff of the 3 properties: 1st now, 2nd in 8 years and 3rd in 15 years or something like that.

Good luck!

Sara,

You have a great deal at 3.75% for a non-owner occupied property, especially for a small mortgage.  Competitive rates for someone with excellent credit today are 5% and higher.

The loan info you show in your posting is a little hard to understand without the headers.  You will be paying about $4,900 using your data above to get what amounts to $15,000 back.  Of course, your father-in-law will be paid off which counts for something too.  If we set aside the value of paying off your father-in-law, this is very expensive money.

My recommendation is to talk with your father-in-law about extending the mortgage at a competitive rate.  You could privately agree to a new rate and term without most, if not all, of the above costs and pay him 5%-6%, for example.  You could also agree that you will obtain refinancing within 6 months of his request if he needs his funds back.  That would get you $4,900 right there and hopefully an even happier father-in-law.

If you were to need to sue, you would make all the costs you mentioned (lawyer, survey, etc) part of your claim as you would not have done any of those things if not for the fence being there.

An additional option: after obtaining the letter from your township, municipal authority, etc supporting your position; survey results and anything else you have, give your neighbor a letter stating you are going to take down the fence he built on your property against your will.  State the fence materials will likely be destroyed and you will sue him for the bill for the removal, disposal and all of your other costs.  He will need to sue you to stop you and will realize he will lose his fence in the process.  After all of that, you can still sue to recover costs but the fence will be gone.  Unfortunately, you would have to front the fence removal cost.

All good advice above.

Consider engaging your local municipality and sewage authority as an independent 3rd or 4th force in this situation.  One-on-one it is you against your neighbor who is a lawyer.  You might be able to make this three-on-one, two of which are government agencies that don't care how much something costs.

If the local municipality requires a permit for the fence, as mentioned above - check with them to see if one was pulled (wasn't), then ask the municipality to act: not you.  They may just say that it is a civil matter and you have to sue to take action, but could provide a letter supporting your position.  That letter will be gold in your lawsuit and your lawyer neighbor will know it.

Most sewage authorities (municipal authority usually in PA) have easements for the sewer lines requiring them to be clear of obstructions.  Ask your sewage company to address your sewer issue.  They will tell you the fence must come down.  "No problem", you say.  Ask them to send you and your neighbor that requirement in writing.  Give them permission to take it down since it is on your property and copy your neighbor.  Set it up so the sewer authority is doing all of the action.

These are 2 ideas if the friendly, neighborly approach doesn't work of course.

@Mark K.

My mistake.  The K-1 was correct.  This was my error.

@Mark K. My very simple K-1 was wrong too.  Disappointing.

It reads like a good property and the owner might be a bit proud of it. Rightfully, so. You might end up paying a premium for it as a premium property. What ROI do you see coming from it?

You are likely to get a better ROI from a property in which you pay a discount and have an opportunity to raise rents and overall property value than one already with a maxed out potential. It is nice to have a property that needs no work at purchase, but you do pay for it up front. That isn't a bad thing, just make sure you are on track to achieve your ROI goals.

You haven't written why you are interested in the property.  There are lots of properties.  Keep them in mind and give them a tickler every month or two, but let them know you are moving on to other properties, then move on.

It seems you are talking with owners, not sellers.  Some owners list their property high to see if they can get a great deal.  Make your offer if you want to and tell them you are moving on to other properties if they aren't willing to budge.  Give them a tickler every month or two to let them know you are still interested, but at your price, if your interest remains.  The key is to be willing to move on.

How did you know it was a great property with all the comps and everything looked great, but be wildly in error on the value?

You should personally know what you are marketing before you market it.  I get the impression the property needs a lot of work from your posting.  Did you under-estimate that?