All Forum Posts by: Mary White

Thank you for your response. The property is held under me personally with no LLC associated with it. None of the credit card expenses were for personal items on the last property. On my current BRRRR I was planning to pay off one card (about $10,000) with proceeds, but hold the rest of the cash for the next purchase. It sounds like it's cleaner and easier if I just hold it as cash.

I'm concerned that even though my accountant advertises themselves as familiar with rental investment taxes, they seem to be crippling this BRRRR process for me.

The debt being paid off was to further my business by clearing up debts incurred for the 4-plex so I could purchase my next property. Does that make it a legitimate business expense?

In 2017 I purchased a foreclosed 4-plex to do a BRRRR. We cashed out a state retirement account from a previous job, used cash and also partial 1031 money for the all cash purchase. In March of 2018, I got a loan on the property and used most of the cashed out money to pay off credit cards that we used to fund the repairs. My tax accountant just informed me that any cash out refinance money that is used to pay off debt makes all debt on the property not deductible. Meaning that the mortgage interest and taxes are not deductible in any way on a rental if funds from the loan are used to pay off consumer debts. Can anyone help me understand this better? Are we screwed for the life of the funds invested into this property? Can we never 1031 into something else or get a different mortgage to reset this and allow the interest and taxes to be deducted? This is a major blow to our investment strategy. Please help because I'm getting ready to finance another BRRRR (and use some of the money to pay off a credit card used for repairs). I don't want to screw up because I don't fully understand the new tax laws.

Congratulations! I'm almost done with a 6-month BRRRR as well. Were lenders willing to speak with you at the 4ish-month point in order to close at 6-months instead of beginning the financing process once 6 months had passed? Our roof is going on now and once finished I'll be ready to work on financing. One complication for us has been a tenant that we chose to keep through the process. It isn't easy to do interior work with somebody living in the home, but he's a really solid tenant so we're working around it.

How funny, we blame everything on California, including rent control ideas. Oregon's decision to go statewide with rent control is really crappy for rural areas like mine. However, I choose to see it as a learning opportunity. I am now forced to always increase the rents annually instead of only adjusting when the economy dictates it. There is a higher likelihood that I will allow units to sit vacant longer rather than do something like work with a pet owner. Basically, it sucks that we have rent control but it also forces me to run my business better. Oregon should have learned from the some of the nightmare rent control problems in places like New York City and San Francisco. Now we're just a social and economic experiment for the rent of the country to learn from. 

There's no guarantee that the sellers will meet you in the middle. We sold a home last year and the appraisal came in about $10,000 under. We were already wondering if we should pull it off the market and install new flooring before relisting it, so we refused to budge. Our agent shared with the buyer that we'd just put in new flooring and list if for more if they walked. The sellers brought the extra $10,000 to the table. Not all sellers are in a hurry or willing to budge in this market. If it's the most important and biggest item they own, they want to get as much as possible. I would only offer what I believed the property to be worth and not a penny more. Don't get married to a deal and be ready to walk if there's a big margin between appraisal and offer. 

PS - Not all appraisers are the same. We have a really crummy one where I live. Appraisals fall short all the time because he wants to personally control the market.

Hi Robert,

We got stuck in 2007 with a house that we got an excellent price on in an up and coming Albany, Oregon neighborhood. We were forced to rent it out due to a cross-state move and barely break even every month. The market hadn't recovered significantly until about 2015, so we had a long distance (7 hours away) rental for all that time and were unable to sell it as owner occupants. Last year we sold it and had to go through a failed 1031 exchange (shady real estate agent caused problems). We ended up losing the full exchange and settling for a partial exchange. We are now writing a fat check to the IRS for our capital gains. 

Long story short, I would definitely sell the property and "get while the getting's good." We did still get very good gains on the property by allowing it to bounce back and then some, but the years of stress are so not worth it. Put that $200,000 in the bank and don't spend it until you have the property and market that match up with your goals. 

I hope this helps! 

Hi Will, 

Thanks for the response. I'll go read your article. It can definitely frustrating when a student renter is open-minded and trusting, but the parents are so worried that the big-bad wolf landlords will screw over little Johnny, that they over-step. I'm careful with my screening and end up with a high percentage of good kids, but it helps that I'm mostly involved with technology school kids (Oregon Institute of Technology). They're all pretty studious and conservative. 

Cheers! 

We focus only on towns with college tenants, although we rent to a mixture of people. I find new renters to be highly trainable and typically respectful. Their parents or student loans often pay their rent and they will move out in a reasonable amount of time to allow for rent increases and improvements. The only frustrations we've had happen when a parent advises their kid on how to "handle" the landlords. With careful screening, it's easy to notice those kinds of people.

BTW, I'm from Eugene and absolutely love it there. I believe strongly that it will keep appreciating well into the future. That awkward "sliver" and house is highly likely to be a good long-term investment.

I'd look for a win-win agreement with the seller. If you are honest with her about what you can afford and believe it to be worth, your intentions and all other aspects, you may be surprised at her reaction. There are many people who don't mind giving a deal to somebody they know/ care about. I'd put together an offer that is profitable for you and simply present it to her along with suggesting that she wouldn't have to deal with realtors or other hassles. She may say no, but if the offer is made with respect, there won't be relationship damage. If she feels that you are being fair and honest, she is likely to treat you the same way.