All Forum Posts by: Kathy Henley

@Thomas Waski Family members who live out of the area and not interested in spiffing up the place, reveal themselves with poor photos and uninformative descriptions. Photos of untidy apartments, like the seller doesn't care. Or a description saying, 'new roof around 10 years ago,' because they can remember that a roof was installed but wasn't engaged in the details. I found one on craigslist and 2 on the MLS.

@Vatsal Patel There was a time that I was looking, when investing from out of state. I looked at the PM reviews on Yelp and made a list of names. Then I called each company with decent reviews, asked questions, and whittled the list to those that I wanted to meet. Next visit to the area, I interviewed each face to face. Find one which has the same focus as you.

 @Dylan Smith   Section 8 is rental assistance program for your tenants, not for a buyer. Contact your local Housing Authority for dwelling qualifications, inspection criteria to become a Landlord in the program and guidelines for tenant applicants. Occasionally, Housing Authority might hold workshops for tenants and Landlords. Attend both to better acquaint yourself.

@Nicole Harrington Think this through, Nicole. If he weren't your spouse, would you choose him for a business partner?  There are so many decisions to make when rehabbing or choosing tenants, hiring and firing contractors, choosing ceiling fixtures and coming up with more money when the unexpected happens. Would there be stress if you worked together?

Why 'keep it in the family'? It's just money. Make it your way and share it with the family.

@Jeffrey Muth Jr  Yes the parking lot DOES need attention. A property without debt is in a strong position for an equity loan. A down payment may not be required because of the existing equity. Talk a little longer when talking to each banker that you meet. Use contractor bid amounts to share with Lender. Seek a line of credit on the equity, large enough to complete your repairs.

@Jeffrey Muth Jr Roofs are important, they protect the integrity of the structure. Can you chase the roof leak for another year by patching it again? #2 sounds important. #3 can wait. #4 Can a seal coat get you through the winter? Don't sign a lease until you have roughed out the expense figures and have a business plan. You can borrow but there has to be a plan for the asset to pay for its upkeep.

You need funds. Or a partner. Is there a mortgage on the property? Time to meet some commercial lenders and see if any funds could be tapped for the capital repairs. The property would be appraised for an equity loan and the Lender will be interested in the rental income, of which you have none. Would the rent rate cover the loan payments?  You might qualify for a personal loan. Must have a plan on the asset making the loan payments.

What do you want to do with the property, as the new owner? You are not bound by Dad's business plan. Is selling it an option? It has a handsome canopy over the parking lot. How could that be marketed to earn money? Could you open a coffee drive through under it?

@Ryan Rotz Are you analyzing this purchase as an investment? Buy low, sell high kind of thing? Or is this a primary home with a rentable basement and you are trying to make ends meet?  The tax man will want to know. You show a monthly mortgage payment of $1,980. Where does the $160,000 of rehab money come from? How long will the rehab take? Will you live there during construction (maybe the basement?) How long can you pay the bills before you need rental income?

Will the area support one more AirBnb apartments? I have had successful furnished rentals. Then the market changed and we signed long term leases. It is best to analyze the investment with long term rent rates and enjoy the flush short term furnished rent rate, as long as it lasts. Use the worse case scenario numbers. Budget a savings plan for the roof. They are real.

@Jacob Badger I am not an expert.

It sounds like you and wife understand how to live below your means, to pay off the primary home. You are smart and disciplined. Well done! Yet you are overlooking a few tools: the mortgage interest deduction (off-sets your income tax burden) and leverage (the power of money). Your home equity could be put to use to grow your wealth. To be a success, the investment property must make sense. Be sure that the investment pays for itself (rental income covers the mortgage and monthly expenses).

@Joe Distasio Investing in Duplexes, Triplexes and Quads, by Larry Loftis

@John Yowpa Time to read one of the books written by Garrett Sutton about setting up LLCs and putting the tax code to work for YOU. Find another book about non-profits, I know nothing about that business model.  Get with your CPA to see that you are on the right path in keeping records, doing it properly and avoiding tax fraud. 

The purpose each company is to make a profit. The income and expenses of each company will determine the profit. It might be that each company will file a tax return and the LLC members will declare the income, or loss, on their personal return. It depends on how your set up the LLCs, check with your real estate attorney.

Using personal money for a down payment on an investment property might be called capital (not a loan). Each member's roles and contributions to the LLC might be expressed as a percentage of ownership, when the LLC starts. Check with your real estate attorney and CPA that your LLC structure is clear. Later, capital can be returned to the owner as an 'ownership draw' and such a draw is not a taxable event.

Rent is a business expense for company #1 and would be income for #2. Company #2 may have other expenses - property tax, insurance, roof repair, landscaping, window washing and depreciation expense (my favorite).  Take a look at the schedule E of a US tax return, to see a list of expense categories when figuring property income. Aim for these categories when coding your receipts.  

Principal payments on the mortgage are not a business expense. The interest payments are a business expense. Don't overlook mileage and travel expenses.

Each LLC might also file a NY state tax return. Ask your CPA.