All Forum Posts by: Jonathan R McLaughlin

Regardless about what any realtor or analysis says, you are going to pay capex...above the line, below the line, whatever. Especially in a cash flow not appreciation purchase. Sellers love not to include it in their calculations of value at all but you will have it on something, regardless of how the spreadsheet accounts for it, even if you don't pay it outright: Say you buy a place with a roof thats 10 years old and hold it for 5 years. Next buyer comes along and factors in the cost of a roof replacement in 5 years to their offer.

The low vacancy rate leapt out at me. This is often where a property can outperform the paper and yet the place sounds very likely to have high turnover and tenant issues at that rental rate. After financing you are working awfully hard for veerry little. You could always ask a bank what factor they use when underwriting the mortgage. I bet its closer to 8%

Agreed with the maintenance being too low. Also, check how taxes change with a purchase above assessed value, they will likely go up. So too will the utilities and likely faster then the rents. 

How will you drive the supposedly undermarket rents up? I would imagine you would have to spend money to do that.

Is there anything you see that makes you really want to own it? Location? Changing tenant base? Ease of access? On the information provided it doesn't seem appealing and I don't see an obvious path to make money.

Good luck on everything!

It depends greatly on your bank, but know first hand it is possible to have the lenders extend the 60 day period. Not sure if it can work with the FHA, others can speak to that.

The bank would have to accept an affidavit from you that you are moving into the property as the primary residence and need to wait until X date to do so due to the tenant having a lease. Even better if you have written evidence of intent to move, giving notice etc.

This is not a long term solution, but for a mostly technical difference of 30 days or so might work. Combo of that and extend closing. Intent matters here. 

good luck Rocky! Would be very curious to learn what they say.

I'd think about it and not be automatically dissuaded by conventional wisdom. Could go either way. Slightly random thoughts:

Computations of present vs. future value are inherently uncertain--anyone know what tax rates are in 2047? Also, few calculations take into account the potential reinvestment of the money earned from the real estate 

What other access to money do you have? People on this board seem to think nothing of paying 4 points to a hard money lender, but shy away from a similar fee called a tax penalty. Both are simply fees to access money. If its a good enough investment it may be worth it. Pretty high bar to clear though...

What is your tolerance for risk? It may or may not be smart, but it is definitely risky. Is this your only retirement vehicle? I can consider being a little more aggressive with a 401K as I have a defined benefit vested pension as well.

Personally I wouldn't do it for a flip, but would consider it for a dividend producing (i.e rental income) property I would hold.

I also wouldn't cash the whole thing out. Leave enough in there to reaccumulate.

Starting t age 55 you won't have to pay a penalty for early withdrawal, though its still a big tax hit 

I haven't done a cash out--yet--though I've used a 401K loan a number of times and it has worked out extremely well. 5 year amortization, but you are paying yourself and if you ever stop, you won't be penalized or taxed on what you paid back. So, pay back half of a 50K loan and your tax liability is on 25K plus the 2.5K penalty.

Your gross income for the year will be affected by the withdrawal, so be prepared for a higher bracket.

Not an accountant, not a lawyer. Good luck!!

quick question, is the stuff he was allegedly stealing (an arrest is not a conviction) going in your house? It might be worth a quick check with an attorney to understand your liability and your obligations.

I don't pretend to know anything about it, but having stolen goods installed, especially if you have personal knowledge of the circumstances can't be a good thing to be involved with.

Sounds like you had a good attorney draft your contract, yes? I am NOT an attorney but your statements read to me you are on pretty solid ground since the seller can't deliver the UandO certificate and its part of the contract.  Will your bank even close without it?

I'd tell them to mail you back the EMD or get it fixed before close. Maybe that you would be willing to extend the close a few days if you want to stay in the game on the property. Why make this your problem? He is going to have to fix it anyway.

@alussa lebestamer To answer your question simply...no there is no merit at all in waiting, or in talking to him further. Nothing different will happen and you are just costing yourself time and money and stress. Things can go smoothly when u turn this over to the professionals and follow their advice. Hoping you can save money by being "understanding" is the surest path to failure. We all are tempted to think "but this one is different" and it won't be true. Easier to tell from outside than in it. There is nothing to be worked out here.

Hi Luka, et al. this is a great source on stats for charities and philanthropy:

http://nccs.urban.org/data-statistics/charitable-g...

This one I think points to the same conclusions using the same data set (though its not precisely clear if thats true so I'm guessing a bit) and is specific about it being for only itemized returns. Same conclusion, those on the lowest end and those on the highest end give the most, though percentages presented here vary slightly from the other link.

Given the large #s, I'd be willing to bet its broadly accurate, and if anything understated at both ends. Not every charitable contribution gets a receipt, especially religious....and none of this counts direct help to those people someone knows, or donated school supplies etc..

I've seen extraordinary and often very, very private generosity performed by people of all incomes. Wealth gives greater means, but not necessarily greater (or lesser) inclination. 

admittedly a slight tangent, but talk of taxes here is usually of income and property tax--no surprise-- but there are plenty of other taxes where everyone is hit, and the lower end of the income stream sometime gets a greater percentage of AGI hit: payroll and sales tax being huge ones and other taxes euphemistically called "fees" such as car registration, inspections etc. 

To quote Tom Hanks on Saturday Night Live: "thats how they get ya..." :)

Hi Luka,

I found it here: https://www.fool.com/retirement/2016/11/27/the-average-americans-charitable-donations-how-do.aspx and now that you bring it up I'm curious too, though MF is a pretty good source. 

Sounds like it's a decent bet for both rents to grow and the place to appreciate given the location near a university. Why not hang in to it for a bit and see which way the wind blows...not to mention you would switch to the cap gains rate after a year instead of ordinary income, and you might be able to leverage more if value goes up...which it could by increasing rents...