All Forum Posts by: Mark Stone

Curious to know people's counter argument to my recommendation on the FHA 203k loan.

Obviously, a lot of good recommendations on here and a lot come down to your preferences (flipping properties vs. buy,rehab, hold etc).

Seems like the FHA 203k strategy would offer a lot of upside without as much risk. Potential to force appreciation via rehabbing the units, cash flow from the beginning to help you cover mortgage payments. You could also potentially drop PMI via a refinance once done fixing them up in a year or two and increase your cash flow.

Definitely plan to talk to my CPA about my specific case, just wanted to get a general sense of whether or not it was a practice that was commonly used.

I may already be at a loss for my rental income, but with about $7500 I could potentially shield of taxes from my regular income via the passive loss rule (I am in the phase out and not considered an RE professional).

Thanks for all of the things to think about though.

I would say that a lot of the stuff I plan to purchase would likely be considered upgrades though, like laying tile in the kitchen and bathroom and new cabinets in both. So, if so, would those therefore need to be depreciated anyways and wouldn't make a big difference in my deductions. Just roughly $5k spent depreciated over 27.5 years as opposed to $5k written off in 2016 alone?

Thanks everyone!   

My back tenant will be moving out in the next 2-3 months. I have a lot of repairs I will need to do in his unit. Would it be advisable or legal to purchase the material now before the end of the year so that I can write it off for my 2016 taxes, as opposed to waiting an entire year until 2017 taxes?

I am looking to spend roughly $3-5k on everything from tile, fans, blinds, door locks, kitchen cabinets, oven, fridge etc.

Thanks for your advice!

Also, from my understanding 5+ units is considered commercial residential (regardless of owner-occupied or not) and will likely require a 20% down payment, so I would stay under 5 units.

I would suggest looking into a FHA 203k loan as well if you want to buy a distressed multi-unit property. This allows you to take out a loan for the property as well as rehab costs.

You could potentially put only 3.5% down on a 3-4 unit property, have money available to rehab the units and could even likely buy a property with tenants in place so right of the bat they are helping you with your mortgage. 

If 1 or 2 units are vacant upon purchase you could be rehabbing those while living there and as the other tenant leases run out then you can then transition to rehabbing their units with some of the $20k you have left over, and by then hopefully already have a new tenant in the rehab units paying at a higher rental rate.

Looks like 640 is the recommended credit score as well and they will consider lower, so you should be fine in that are.

One hurdle may be:

"Cash reserves are not necessarily required, but are encouraged. (3-4 unit properties require reserves)"

Not sure how much reserves required.

http://www.amerifirst.com/amerifirst-blog/bid/9066...

Hey guys,

I came across this article by NOLO, which from my experience has been a pretty good resource, but wanted to get your thought on the topic.

http://www.nolo.com/legal-encyclopedia/deducting-e...

It appears to address tax write-offs for new RE Investors. Last year I purchased my first property (triplex, owner-occupied) and I am thinking I may have missed out on some potential write-offs specific for new investors.

For example, I did a total rehab on my front unit. This rehab took me a ridiculous amount of time (8-10 months) bc of other life situations I was dealing with. During this time I had utilities connected and was paying for them monthly (water and electric). My CPA last year said I couldn't write this off due to the fact that I didn't have a tenant in the front unit during the year nor was I actively marketing it at any point for 2015, it was eventually rented in 2016. 

Could there be an exception to the rule for me since I was a new RE investor?

Thanks for your help!

I live in the triplex in one of the units and he lives in another unit. He has paid cash each month for the past 16 months, mainly bc he doesn't have a checking account. Having them get money orders seemed like it would only cost them more money and therefore make them less likely to pay.

It was just strange that he has always paid me in cash and then today dropped off a check while I was asleep after acting like he was going to pay me in cash per usual. 

Just figured it was off and didn't want to have to wait until monday to deposit and then however many days until it cashes to be verfied, when he is already really late on rent.

Thanks for the advice everyone. I thought if I posted the notice today the 15th day would be December 31st and therefore it would be ok.

Also my tenant recently got a new job and he got paid this Friday by his boss but also had his boss write a check to me for the remainder of rent. Is this acceptable? I immidiedtly told him it wasn't bc I was expecting to get cash from him as he usually does and he didnt forewarn me of this. I just wanted to get your guys opinion on it.

Thanks

I recently posted a few questions and received a lot of great help and feedback but it left me with one last question I was hoping someone could help me with.

In Florida I am confident I can give my tenant a notice to move out in 15 days since we are on a month to month lease at this point.

I am however unsure of the following:

-Can this be given to him on a weekend, aka today Saturday and therefore the 15th day being Dec 31st

-If I gave it to him tomorrow and the 15th day rolled into January, would he in fact have until the end of January to move out then (going off of a response I received from another member on a different post)

-Anything else I need to be aware of before giving him this notice today, which I would like to do if he doesn't get me rent (which is 12 days late, per usual)

Also, while I am at it does anyone have an opinion on reasonable late fees for late rent. The previous owner of my property wrote the lease we are using and it states, $200 for posting a notice of failure to pay rent, and also a late fee of $5 every day rent is late, with no apparent cap listed. 

Thanks for any help!

And also if you knock the rate down on his credit card payment, to even 10% you could make much much more long term. And since his mortgage will be less than he is paying you in rent he should have the means to pay it.