All Forum Posts by: Joe Splitrock

Haha, I am so mad at you. You have a paid for car and you dropped $25K on something new! 

Lets say your car payment is $450 per month, so by selling your new car you would save up $5400. Add that to your $10,000 and you would have a $15,400 down payment. You can probably buy a duplex that is between $60K and $100K with that down payment, depending on financing. Lets say the property is $100K and your payment with tax and insurance is $650. You rent one unit for $650 and live in the other. Now your saved rent money combined with money you saved on car payment is over $1000 per month. You could save up over $12,000 per year to put towards more properties. Maybe my numbers are off some, but you get the point.

No, that seems like it would destroy and architectural feature and cost you money. I do not live in the area, but would it be fair to say people would just accept that climate issue.

This was my first concern when I read the post. Many HOA are limiting rentals because it drives down property value for others to have too many rentals.

That was a weird comment that Brandon just left to your post. It must have been automated, because it doesn't relate to your subject. I do not invest in your area, so I am not sure what licenses are required or what fines could occur. I would speak with a real estate lawyer about the matter to find out the best way to get the licenses and avoid any fines. I think it is smart to get the legally required licenses now that you are aware you need them. 

As far as section 8, there are lots of opinions. I think so much depends on the location and type of property. Section 8 can be great in some situations. The advantage is you get guaranteed rent check every month. The opposing view is that since the tenants are not paying their own money, they are less likely to take good care of the property. 

Good luck!

Good point, I agree that having an exclusion would help. In general anything to show your negligence was not a contributing factor is good. I do not think it is too late to communicate in writing that the daycare needs to close and further stating that his liability insurance doesn't cover it's operation. Send it certified mail. At least then if something does happen, there is a documented paper trail that he made good faith efforts to remove the risk. It may not prevent a liability claim, but I suspect it would help if he tried to make an insurance claim. A similar example would be a trampoline on a property. My insurance doesn't allow trampolines, but if I was not aware or if I was aware and made good faith efforts to get it removed, my insurance would offer me liability protection. This is one mistake landlords make. Once you become aware of a safety hazard, you must take immediate action to remedy. In this case it would be easy to stick your head in the sand and ignore the daycare, because it helps them pay rent. True, you would get your money today, but I would argue it is not worth the risk. Life is all about calculated risk.

Adam, are you sure that option 2 is possible or necessary since it was never put into use as an income property? If their goal is to just pocket the gains and buy another property, then they can just sell the house and take the gains tax free, since it was personal primary residence. 

If they keep it as a rental property, they will need to establish a basis value. I think generally that is purchase price plus improvements or market value today. That becomes the depreciation value. Then when the house is sold, they will need to realize any gains. I don't think they will be forced to pay taxes on gains from a primary residence just by converting to a rental property, but they will need to pay taxes on any value increase that occurs after it was converted to a rental property.

If the property is kept, I would sit down with a good tax accountant to make sure this is done properly.

 I am not sure having a clause about not allowing business in your property increases or decreases your liability. Even if you had the clause and she was operating a business, you could still be held liable for a child that got hurt on your property. It is very unlikely your insurance would allow a day care and they would likely not cover you from a liability standpoint if something happened. It would be different if you didn't know, but now that you do know, you should notify the tenant that day cares are not allowed per your insurance. The liability of a day care could destroy you in the event something happens and things do happen. I would rather have a vacancy or someone slow paying rent than have that type of liability. Check your insurance policy and lease. Then consult your lawyer for professional advice.

 So true. I get friend requests from tenants on Facebook and I reject them. I hear stories of landlords that become great friends with tenants and it is trouble waiting to happen. What happens when they don't have money for rent? I am also skeptical about people who invest with friends or relatives. I heard it put best that friendship born out of business can work, but going into business with friends rarely turns out. I am sure there are exceptions, but I don't want to risk friendships.

My first impression was that you should be driving a 10 year old car you paid cash for and not a new car you owe $25K on. If you can sell the car and break even, I would get rid of it and use the $10K to pay cash for a car. If you are under water on the car, it may be better to work hard to pay it off. If you keep that car, drive it for 15 years. 

Debt for cars is bad debt. I pay cash for all my cars. Debt for income producing property is different. 

You may not like sales, but it will give you highest income producing opportunity of any career. I recognized that years ago when I took a part time job in sales while I was in school. I was selling electronics on pure commission working part time making $30K a year in 1993. I worked in sales for years and no I didn't love it, but I was good enough to make money for real estate purchases.

I would suggest for your first purchase to house hack a duplex. Live in one side and the rent from the other side should pay your payment. Imagine that, no car payment and no rent payment. Then working in sales you can save all your cash to buy rental properties.

Good luck!

I have been doing all my own repairs for 12 years. I would just recommend Google. It is like a gigantic reference book. The best thing is to tenant proof your property, which means remove all the things they can easily break.