All Forum Posts by: Joe Splitrock

@Chad Bartlett I would recommend getting the tenant to sign a new MTM lease at current rent. Then wait a couple months until it is closer to summer and send a rent increase letter. I say this for three reasons:

1. It is easier to get the tenant to sign your lease agreement if it is cost and term neutral to the current lease. You are just "getting them on your system".

2. Summer is a better time to lease in cold parts of the country. That means if they choose to move out, you should be able to easily rerent at top dollar. End of April or May is a good time to send the increase. 

3. This gives you a couple months to evaluate the current tenant and determine the appropriate increase amount. You may even choose to push a non-renewal.

Quote from @Josh Gardere:

@Natalie Kolodij Honestly, I would need to write it off in a year to seriously consider this route. I wouldn’t want to be stuck with that monthly payment for the duration of the term. Thanks for your input.

 Be aware that payment term is based on financing, write off is based on how the expense is claimed. For example, a roof repair that cost you $3000, could be claimed as a $3000 expense on your 2022 taxes. If you took out a three year loan to pay for this, you would pay in 2022, 2023 and 2024. The interest portion of your payment would be deductible in those tax years. If you replaced the entire roof, you would need to capitalize and depreciate, so the expense is claimed over a number of tax years. In that situation the loan may be paid off before you are done depreciating.

Quote from @Ruth P.:

Hi BiggerPockets:  Can anyone tell me if $12K is a decent deal for the following?:

"Remove house trap and replace sewer main from house trap end to street.  Repave driveway and replace concrete floor removed for new sewer line in basement.  Replace two (2) existing 1/" valves and replace existing failed thermal expansion tank with one (1) new Amtrol ST12 thermal expansion tank.  All materials and labor to complete installation included."

Also, the financing rate would be 7.99% - 12.99% over 10 years with a payment between $145-$178 per month.  Is that a decent rate or should I try getting a personal loan from some place like Lending Tree?  My credit is good.  Or just pay in full (which I could do if I wanted to)?

Thanks for your help!  I appreciate the BiggerPockets community!

For the digging and repair work involved that may be about right, but get a second quote. What is the nature of the problem? There may be an option to line the drain instead of digging, which could be half the cost. Just depends on if the pipe is fully collapsed or open enough to be lined. 

Interesting, this uses crypto as collateral for the loan. I am assuming the bank also holds a lien on the property, so they have two sources of collateral. That reduces risk for them lending 100%. As the article says, there could be a margin call option build into the mortgage, so that could add risk to the borrower.

Quote from @Carini Rochester:

Sorry for thinking that through incorrectly. Thanks to the accountants.

I would see this as the real estate business getting a loan that the real estate business will pay back (principle and interest) (through the rent proceeds.) If the money is used personally, that would be a taxable (personal income tax) draw on the real estate business. I (personally) didn't take out the loan. I (personally) don't pay the loan back.

I hope this doesn't get too far off @Christian Flanders 's question. I'd appreciate comments and helpful insight from the accountants. Thank you. @Ashish Acharya @Natalie Kolodij

@Natalie Kolodij

 Sorry but this isn't correct either. Deductibility of interest follows use. If you use the money for personal use, the interest is not deductible. The money you take out is not subject to personal income tax as income. All you are doing is taking out a personal loan and using the rental property to secure the loan. 

More simply put, whether a loan is a business loan or personal loan is based on USE. It is not based on where the money comes to pay back the loan or what it is secured against.

@Ralph Ace 

Depending on the scope of work, it may or may not be a big concern.

You can tell the realtor that code requires pulling permits, so no the contractor did not do the work to code. 

I have seen highly experienced professionals do simple work and get something minor flagged during inspection. Inspections verify things are done safely and to code, which protects you and your investment. 

There is not a single contractor on the planet that will tell you "I do half *** work that doesn't meet code" and there isn't a single contractor on the planet that hasn't had issues flagged during inspection. That is one reason people don't get things inspected, because inspectors can flag things that they find minor. They don't like it, so they don't get things inspected.

You may be able to find a property manager who will agree to this, but odds are good they are new and inexperienced. There are several reasons that PM will not change leases:

1. It is very hard for a property management company to run their business if every lease has different terms in it. Their managers need to constantly be looking at the lease.
2. Lease changes require attorney involvement. There is time and expense involved in this.
3. Property managers have already adapted their lease over time. If they think it needs to be in the lease, it is in the lease. 
4. A property manager has dealt with hundreds of tenants and you have dealt with only a handful. Just based on volume, they have more experience in this matter.

@Daniel Tisdale you are required to charge fair market rent and they need to charge you interest. Assuming you finance 100%, you are looking at over a $4000 payment (30 year fixed) and you will need to pay insurance and taxes. Odds are good your payment is over $5000. I assume fair market rent would also be well over $5000. So if you seller finance, they will need to pay MORE than you pay them. That doesn't help them at all. They need the cash from selling the property, but realistically it wouldn't make sense to rent this place for $5000 a month in retirement. 

One option may be a reverse mortgage. 

Realistically, they can either rent or buy a retirement home for much less. It may require moving to another city or state. I don't see how you can keep this home without loosing a bunch of money on the investment. 

The profession doesn't require licensing, education or money to get started. With such a low barrier to entry, it attracts a disproportionate percentage of bad actors. All you can do is conduct your business ethically and legally. You can't change the industry, so just focus on yourself. In any business to succeed long term, you need to build a good reputation. 

My personal opinion, there should be more regulation on the industry. The person at your local Cost Cutters or Great Clips cutting your hair has gone through more schooling and licensing than it takes to be a wholesaler.

Quote from @Tia Wilson:

I just finished the BRRR Book and I'm trying to understand the purchase process. IOT to properly BRRR I would need to buy a house roughly 75% undervalue, correct? For example if I saw a house for sale for 180K I would need to buy it at around 135K? Can any BRRR vets help me out please? Thanks yall.

Correct, sounds like you understands how it works.