All Forum Posts by: Justin B.

Well, you are under contract at $81k and the value came in at $82k.  The appraisal is based on current conditions.  Appraisals don't factor in what you might repair or what you say you will repair.  The appraiser is saying the property is worth $82k and you are under contract for $81k.  Therefore the "appraisal clause" that gives you an out, doesn't apply.  Assuming you have financing that satisfies your financing clause, sounds like you have no clean outs.

However, you can always ask for another $3k reduction and offer $78k, but if I'm the seller I'd reject it and force you to go through with the purchase at $81k as I see nothing in your explanation that would allow you out of my typical contract.  If you had been under contract for $85k and the appraisal was $82k, you could re-offer whatever you want and if the seller declined, you could get out of the contract and get your earnest money back clean and clear.  As it stands if you re-offer $78k and the seller declines and you want out, you'll probably lose your earnest money because based on the contracts I use, you would be in breach.

Probably not what you wanted to hear, but if the numbers work at $81k, you should be all set.

Brandon, fully agree with everything and that's how I do it all today.  Was just wondering if I was missing out on some new real estate accounting technique or something to make it all easier/quicker.  Turns out I'm not :)

Yea, I'm good with all that.  I realize TurboTax isn't the best but I completely understand what I'm doing and I just use TurboTax basically to autofill the forms.  Once you understand how TurboTax does it, even depreciation is fine.  Once I get to a certain level, I fully plan on turning over accounting and taxes to a CPA, mainly because as some point I won't have time to do it anymore.  I also talked to a CPA friend of mine from college and he said to do it individually as well but I just figured maybe there was something out there that I didn't know.

We've got several properties now and will have a lot more by the end of the year. Does the IRS care about individual property reporting or can you just combine when filing taxes? Accounting and tax filing is time consuming when you have a lot of properties. We are also looking to consolidate our insurance to 1 overall policy that covers all our properties that we can add/remove from pretty easily.  That's not really broken down by property.  I could do my own math or just divide by the number of properties I have at the end of they year I guess, but I'd rather not.  If I submit it like one property for the purposes of taxes (I use TurboTax) as opposed to individual, is that asking for an audit? If it's very common, I'd love to do it that way. Also, from a P&L and Balance Sheet standpoint, every property I get adds several lines to my balance sheet and about 7 lines to my P&L sheet. I'd love to combine if possible.  Is that common in accounting or do you normally always see it broken down by property on P&L's, balance sheets, and tax forms?  I realize me doing it in accounting is my own prerogative, but I want to do it in the way that taxes require it for the ease of doing taxes.

I do have a few things I do that lets me see individual property metrics so I know if one is underperforming and whatnot, I'm just really asking about accounting and tax filings.

Thanks.  Looking at their website it seems to be exactly what I'm looking for.  I'll reach out and see what they are all about.

I'm looking for suggestions on companies to handle multiple properties under one policy.  I have 9 properties in 2 states that I can immediately put under a policy totaling about $600-$700k in value.  I plan on purchasing a lot more properties but currently have what I have spread over multiple carriers and all on individual policies.  I'm looking for one premium, one draft out of my checking account, one number to call for all my properties.  I'm also looking for a company that will allow me to add/remove properties easily (like say just an e-mail or phone call).  If I invested all in one area, I'm sure anyone could do it.  Right now we have no plans for investing outside of the 2 states we're in now, but in the next few years we absolutely will be doing that and I'm looking for someone who can handle insuring properties no matter where we have them inside the USA.

So for those of you with a lot of properties and 1 insurance company/policy, how are you doing it and who are you with?  I'm looking for very specific company recommendations and any pointers you have.

Just based on what you typed, I would recommend a guaranteed payment.  Do a lot of research and contact your CPA for all the exact details.

Basically, if you do a guaranteed payment, the person receiving the payment is responsible for self-employment taxes which means monthly or quarterly payments to the IRS by the individual may be needed. Since the LLC is just writing a check (and again this is simplified for the purpose of this post) the amount is just an expense to the business and all the burden of taxes falls on the individual.

If you do a distribution, this isn't taxable but instead reduces your capital by as much in the LLC (which if you are the only one taking distributions is probably not what you want). Also distributions are usually based around P&L and since what you are describing is payment for services (regardless of income/loss), if the IRS ever audited you they would almost certainly re-classify them as guaranteed payments and then back taxes and penalties come into play.

You also have the option of setting yourself up to do a real payroll, draw a salary, have the company withhold taxes, etc, but that's a headache in the business that I know I wouldn't want until absolutely necessary.

@Mark Ferguson

That's awesome.  Congrats.

For me, I'll never own a property free and clear because I want to increase my portfolio as fast as possible.  I typically re-finance at 60% LtV and buy another property or 2.  But I have a buddy that's doing the same thing.  He wants enough paid off properties (around 10-15) to fund his retirement.  Once he has a certain amount of income each month, he's done.  He wants 10-15 paid off properties that just fund his travel around the world.  Everyone has their own strategy and I can tell you're excited about having the first one paid off, so congrats again!

I don't think he meant he is getting 100% leverage.  He's just saying if he did, he would be looking to get $200/month per unit.  It's strictly analysis.  And everyone is different.

For me, I know exactly what the bank will give me so I use that and factor in potential rent/expenses/vacancy rate and my goal is $300/month per $100k spent.  That's purchase price, not money down.  If I buy a house for $75k, I'm expecting it to cash flow $225/month.  I'm a little lenient on it depending on other factors like if I'm paying top dollar or if I'm buying some instant equity.  If it cash flows $210/month, I may not walk away, but at $100/month, I would.  Some areas don't allow for that much cash flow but where I invest does and it's worked 9 times for me so far.

Henrietta,

Your first step of trying to get out there is great.  The only way to get experience is to do it.  Don't be afraid to fail, and don't be embarrassed.  With that being said, if this size house would completely break you if it failed, it wouldn't be a smart move to do it at your experience level.  The reason I started out buying sub-$100k properties is because worst case, I'm out $500-$600/month if it didn't rent.  That's not a small amount of money, but if I had to pay that all of a sudden, it wouldn't break me.  So getting my feet wet was pretty easy knowing I could cover 100% failure without financial ruin.  I now have 9 of these properties and got them all rented within a couple of months of purchase.

So I know I'm not answering your question about the deal directly.  Perhaps you do need a little more education, but all I read was a lot of books before I bought my first property.  Of course I was nervous but buying within your comfort zone makes it a lot easier.  I didn't even find BP until I had 5 houses.  I had book smarts and no experience.  I jumped into a comfortable depth and now I have loads of experience and feel comfortable jumping up to the next level (Which for me is Multi-family).

I wish you all the best!