All Forum Posts by: Alexis Kennedy

BP members, You have been so helpful, that I just feel I want to let you know what is happening with the situation with my folks rentals. I now have power of attorney and have taken on the responsiblity for their sales.

Currently I am looking at all the comps in the area. The number of foreclosures in Merced is staggering!!!!! My plan is to put them up at a fire sale price and stop the bleeding now.

Will let you know how things work out.

Thank you again,
Alexis

John C, You also made an excellent point on my need to keep up with may parent's finaces and be throurougly aprrised of all aspects. Mom and DaD are already talking about me having power of attorney. DaD hasn't througuly lost it yet; he just get's frustrated much quicker--not like him. Mom doesn't pay that much attention to the situation.

From my short dealing with rental properties, I would find a way to buy them cheap (maybe through auctions) do a little cosmetic repair and that's about it. I don't see how you make a profit buying retail. Think i'll stick in markets where I am much more comfortable.

So I get home to Reno today and the following is what I received in the mail from a realtor I recently bought a home through.
"Hi Alexis, Checking in to see how things are going. I trust you have settled in to your new home and hope all is well. On another note, we have a new commercial division here at the office, and am now delving a bit into that realm. Our company just listed a piece of commercial property in nearby that shows great income, and want to tell you about it. Price is 1.3, returns 100k annually (tenants pay 8300 monthly, 5 years left on 10 yr lease). Seller just needs to sell to streamline his DTI ratio so it must leave his portfolio. Appears to be a slam dunk, would like to tell you more if you have interest.
Hope you two are doing well, Alexis

After what I had just been thorough, I saw this as a slam dunk for the seller. Again, rents are not even 1 percent the value of the property and what in god's green earth do I know about commercial real esatate??? What's a DTI? I recently bought a home from this agent and he knows I have some money tied up because of my husband's untimely death--he was surgeon. Now I am wonder if the agent it trying to lighten my wallet more than get me into a viable investment???? I'm beginning to think there is one at every corner!

What do you experts think of the "deal"?

Alexis
[list][/list:u]

Thought I would update this situation, before I return back home.

I called my folks CPA's office yesterday to leave a message so that I could make an appointment asap. By chance he happened to have stopped by his office for something and picked up the phone (on a Sunday). He suggested I come by and to bring one or both of my folks.

He agreed with you Wheatie. If the market had been what it was for several years before, they would have done very well. He too believed they are total losers and to cut the losses and sell. There's the bad news.

The good news is that this type of investment wasn't typical of my dad. The CPA showed me several million dollars (to my surprise) in assets that my folks have built up over many years. This loss in comparison will be a blip on the radar screen. His past investments show a lot more forethought, and it made me wonder if the Alzheimer's had kicked in more than we realized when he bought the rentals a few years ago.

It was after reading your in-depth post Jon, that I knew I needed to get on this situation right away. You are a real assest to BiggerPockets. Now I can go home without an ulcer.

Thanks again Jon

Alexis

Today I was able to look over my parent's portfolio on these rentals. Yes they are in deep doo doo.

Jon I can't tell you how much your informed reply helped me. Its obvious you have a very firm grip on this type of investment, and the time that you spent to explain things to me is much appreciated.

I made the mistake of reading some of these responses outloud to my folks. Maybe "Ouch" wasn't meant to be mean (I certainly don't say that while giving injections), but my mom started crying and my dad just stared out the window for a while. I guess this situtation isn't so funny to us.

I now have a grasp of the entire situation and will probably be working to see these rentals, at a loss, in the not too distant future.

Thank you again Jon--you are an angel!!!

NiceNurse Alexis
'

Jon, I appreciate your detailed and highly informative response. If I am understanding the situation correctly, the tax advantages are not going to outrun such loses.

I did not mention in my opening e-mail about the financing. Yes it is on an ARM (I just found out). They financed most of the homes on a home equity line of credit :shock: . They also paid a contractor to do quite a bit of updating to the homes so they have more invested than just 230K each.

My friend was certainly right about the response I would receive on this website. I may be coming back as things progress, as my father has recently been diagnosed with Alzheimer's and as an only child, I am taking on more responsibility for both of them. I have a feeling this is going to be pretty painful before its all over.

Thanks again,
Nice

Hello BP Members, I was referred to this website by a physician that I work with, who invests in real estate a lot. He tells me there are some very bright people here who can quickly answer my question. '

So here goes. In 2005, my starry-eyed parents (seeing great real estates gains in their area) decided to jump head first into real estate investing. They had little experience. They bought two rental homes in Merced, Ca at the time we all now know as The Bubble. The homes were purchased for about $230,000 each. On a recent visit to their home, they had a turnover in tenants, and I saw that they were (are) getting $950/month for rent on one place.

From my small perspective (and please let me know what I don't understand), i'm seeing about a 4 percent return before their expenses!!!!(I can easily get 6 to 7 percent on mutual funds without being a landlord with all the overhead, but that's another story). I doubt that after property taxes, expenses and interest on the debt that they are making anything. I want to help them, as I can see they are in some kind of a brain lock. They admit that they aren't thrill with the way things have turned out , but they don't want to throw in the towel. Merced is seeing a lot of foreclosures, and I can't imagine that the market is going to turn around that quickly. Furthermore, today they could not get what they paid those houses.

My question (i'm only a nurse--not a CPA)--Is there some kind of tax advantage or something that I don't understand, that could be making this investment at all feasible? I am afraid that by the time these homes start appreciating again, that they will have gone backwards too long to recover their losses.

I hope I gave you enough information to evaluate this. Maybe this is too much to ask at this point(given that no one can forsee future market conditions in their area), but would you more experienced investors have a strong idea of what you would do in this case? I'm thinking they might want to sell and take the loss now or they will continue to lose.

Thank you for any response. I want to gather hard data before having The Talk with my folks.

NN