All Forum Posts by: Kyle Meyers

And, yes, this should effect the appraised value. If you have a knowledgeable appraiser they will be able to look at the income of the property to determine the value, they may not factor it in if they use the sales comp or cost approaches, but you could be there to point out to them that those are not the best way to measure the value of this property.

If your tenants have a 75 year lease, the rents will have a huge effect on the value. For example, say your tenants do not have rent increases built into the lease so the rent will stay the same for 75 years, once you are 30 years into the lease, it is likely market rents would have increased, but your rent income wouldn't. Your property would be held down in value by the lease because of the difference between the actual rents and the market rents.

In that case, you need to really evaluate the lease and the tenant along with the property. The rents will have a large effect on what the property is worth. An illustration of the effect of the long term lease that I took a look at in one of my real estate classes is the Empire State building. Read this story to see how important the lease terms will be http://siteselection.com/ssinsider/bbdeal/bd020325.htm

Also, you will want to make sure the tenant is a good quality tenant because if they can't keep up the payments, that will change your returns.

Look for what other storage units in the same area, of similar size charge and use that to price this one.

Many investors on BP look at the cash flow from a deal more than the long term gains, and as you pointed out, many of the cheaper rental homes are not likely to go up much in value over time. It is a personal investment strategy choice, and if you see that other investors have neglected this investment you may have found your niche. Just be careful not to overestimate how much the values will inflate.

Fee simple is complete ownership of a property. If it is leased you would be purchasing a leased fee interest in the property because your ownership is subject to the lease. NNN would mean the tenant pays the operating costs and capital expenses.

Send the 1040 and the schedule e and attach a note that shows your AGI + depreciation = income to be considered for loan. Make sure you specify when talking to the lender about your loan that you want them to consider your income with depreciation added back in, if they don't want to do that call the next lender on your list.

Yes, I understand it properly now. I was confused by the change between the accrual and cash methods for reporting. For most of my rental business taxes I report income and expenses under the cash method, but I have to adjust for these taxes to the accrual method. I believe the other thing that would require the use of the accrual method would be prepaid insurance premiums or other expenses which are not used up within 12 months.

I have my accounts payable added to my chart of accounts for my accounting now and I can properly account for these property taxes using the mix between the cash method and accrual method.

The bank still can try to collect on their note with the previous owner, but they do not have the mortgage to secure the note.

I believe the reason the tax lien trumps the mortgage is because the states make the laws and the states want to sell the tax liens to get their cash flow. The banks are still informed that they are going to potentially lose their interest in the property and they can pay off the lien to keep it, but the state/county/city needs to be able to collect the property taxes and this is the best way for them to do that.

It is in the best interest of the public for tax liens to be superior to mortgage liens.

In most states the tax lien will wipe out the mortgage. I am in the process of taking possession of a tax lien property that had an open mortgage on it, the bank must not have been able to get their paperwork organized or decided they didn't want to pay for whatever reason. The bank was sent notice that the tax lien had been sold and when the redemption period would be up.