All Forum Posts by: Paul Haviland

Ryan M. - Welcome to BP! Hopefully this network and the REIA gets you one step closer to that first purchase. From there, things can snowball.

@Matt Lea For clarity, you mean next week Wednesday the 14th (not Monday the 12th).  Correct?

For unsolicited input on a location, I'm a big fan of Come Back Inn/Essen Haus as they have tons of parking (free), better pricing than the square, and is generally dead during the week thus has plenty of space/tables.  

That said, with Matt taking the lead, i'm happy to join anywhere.

Another thing to think about is that this time of year, it is harder to rent places/fill vacancies.  Our rental market is extremely seasonal, and almost all leases end between May 1 and August 15.  That means that renters are looking during the same time of year.  I've found that I'll often have to reduce rents by 10-20% to win the small amount of renters looking this time of year.

I would recommend not giving anyone a 12 month lease this time of year.  Either a 6 or 18 month option because you don't want to end up vacant in the winter again.  If you do have to offer a discount on rent, have a 6 month lease that bumps up to market rents for the following 12 months.  

It doesn't sound like you are under capitalized, but you will want to count on a little vacancy from the beginning.  Also, negotiate that you will have access to the property while under contract so that you could show the vacant unit to prospective tenants and hopefully have it filled when you close.

@Adam Jeske, I own 3 duplexes in the same town (I know exactly what property you talking about). A few quick thoughts.  

- Market rent for those is at least $1000/month

- I believe the current tenant is only paying $600/month, but is on a M-to-M lease and friend of owner

- It is customary in our marketplace for tenants to be responsible for lawn/snow care in a side-by-side duplex  like this one. 

In short, it is not a home run deal, but in our marketplace where the GRM has often escalated to 11+ this is a solid base hit. I agree that you shouldn't count on much negotiating room and also think it will move quickly.

Best of luck.

@Steven Hamilton II I appreciate the quick response. It seems to be different feedback than my CPA just provided.  

"The only exception would be if the LLC has elected to be treated as an S corporation for income tax purposes. If the LLC is an S corporation, and you purchased the LLC you would NOT get basis step up.

If the LLC is a single member LLC (disregarded entity) you would get basis step-up.

If the LLC is treated as a partnership, you would get basis step-up as long as the partnership elected to make a Section 754 election."

Do you know what the difference between his take and your take might be?

If someone purchases an LLC (that owns the real estate) as opposed to purchasing the real estate, is there a tax implication regarding my ability to depreciate the LLC's Assets. For example, if the prior owner has depreciated the assets in the LLC for 10 years, does my basis reset when I purchase the LLC?

Note: The seller wants this because it will help him avoid a transfer tax. It will be advantageous to me because it will not automatically re-trigger the property to be reassessed. Also, I recognize the implications when purchasing a business of taking on liability for past events of the LLC.

Thanks in advance for the help/input (My CPA already left for the weekend :))

Hi All - if downtown, I would be open to joining a meet-up. I know there have been a few organized last spring at the Great Dane in Fitchburg, but was never able to attend. Cheers, Paul

The bank will lend 80% of the lessor value (purchase price or appraised value). In this case, the bank would lend 80% of the $185,000 purchase price. Thus, the initial loan balance would be $148,000.

I don't know the laws everywhere, but I can confidently tell you in Madison you are required to accept the first applicant who meets your minimum rental criteria. Meaning, if you receive two applications, and the first meets the criteria (should be written criteria so you can provide it to prospective tenants and CYA with fair housing laws if need be), must be accepted. Even if after you receive the application and before your finished processing it, another application is submitted with better credit, income, etc. you are still required to accept the first tenant. Best of luck!

Hi everyone - Looking for a few quick answers so as not to mislead a potential Seller. Is an installment sale (land contract) treated the same as seller financing (complete transfer of ownership with Seller carrying financing)? My understanding is they are treated the same for the seller- you pay Capitol gains when you receive the principal back. For example 10% down seller financed property with a 5 year interest only note/mortgage, the Seller will owe 10% of their total Capital gains the year they sell the building (and receive 10% down). They then pay the remaining 90% of cap gains tax when they receive the remaining 90% of the sales proceeds. All interest earned will just be taxed as interest income. The next question is regarding a stepped up basis upon inheriting a property. Let's say that instead of someone holding a property till the end, they sold it just before passing on via an installment sale. Would there still be cap gains due on the principal funds that haven't been returned to the Seller/heirs? Would they receive a stepped up basis on the value of the note? Thanks in advance for any help/info/direction you can provide.