All Forum Posts by: Rob Newsom

Hi BP!

I live in a house that is on a lot zoned for high density MFH.  I'm trying to educate myself on the process (if I decide that the economics make sense) of scraping my house and building a 12-unit apartment building.  The zoning is not an issue.  

Does anybody have experience with this?

Would I need to engage an architect? 

Are there pre-published cookie-cutter plans I could buy and then provide to a builder?

Are there any resources on how to evaluate the economics?

Will a bank finance this?  Assuming I have to pay off the existing mortgage before demolishing the existing house...

Any insights are greatly appreciated!  If i left out any information, let me know and i'll try to clarify.  Thanks! 

A little background info:  My father in law is about to have his condo foreclosed on.  It is currently in forbearance and in about 6 weeks he will lose his property according to him.  I've just learned of his situation about a day ago.  He has come to terms with it, and is saying that he doesn't have enough time to sell the property, so he is planning to just walk away from it.  The condo is in Chicago suburbs.  He paid around $330k for it 12 years ago, and zillow is "estimating" that it is worth about $350k now.  I'm estimating that he has about $100-120k of equity built up that he is literally going to abandon if he doesn't do something quickly.  On top of losing this money, he will also destroy his credit (he's already lived through a bankruptcy once, and is ok with the idea of doing it again).  Sadly, he has brought this whole situation on himself.  He has been gainfully employed for over 5 years as a manager of a country club.  As covid ramped up earlier this year and there was an eviction ban, he thought he could just get away with not paying his mortgage.

I made a half-serious suggestion to him that I would buy his property from him for exactly what he owes the bank (in cash), that way he could at least save his credit.  He was very interested in my offer.  I guess if I was to proceed with the thought experiment, I would then sell the property immediately at market value and hopefully make about $100k.  This is obviously something he could have done himself if he wasn't terrible with his finances. 

Personal relationships aside - he doesn't maintain a very close relationship with his daughter or our family - what could go wrong here?

Before closing, i would get an appraisal of the property to know approximately what my market value is.  I would also have a title search done to make sure he doesn't have a 2nd mortgage, home quity loans, or mechanical liens, etc...

Thanks in advance for your insights!

Thanks for the thoughts!  Here's a question, if I reside in a state with income tax, e.g. California, but all my properties are in states without income tax, e.g. Texas, would/could i end up owing taxes if I'm only residing in that state, i.e. not earning money.  

What i mean is if I'm retired and living off cashflow from other properties and just renting an apartment in California, would it still trigger California state income taxes?

I'm in year 5 of real estate investing.  I've told my wife that I only want to own properties in states that don't have income tax.  The same goes for our personal residence.  

I've heard stories of investors, for example, that owned one property in California, and a multiple properties in other states, and the state of California expected to collect income tax on all out of state properties and income just because the investor had a single property in California.  Is this kind of overreach real?  

I know this thread is old, but hopefully I can still get some clarity on an item...  I've been reading tax rules on expensing repairs vs depreciating capital improvements, and to me this seems like a "no-brainer", but maybe I'm missing something here? (help, please!)  

The roof of a house is comprised of the shingles, felt paper/underlayment, fasteners, flashing and decking/sheathing...  Very rarely does a house need a complete roof replacement.  When was the last time that all the decking had to be replaced on a house having roofing work done?  My perspective is that if you aren't replacing the decking, you are just making repairs to a large portion of the entire roofing system, and therefore the cost is an expense, rather than a capital improvement.  

Am I the only one that thinks along these lines?  Would a CPA not agree with this and refuse to deduct this expense?

Thanks in advance for any insights!

I don't think this is hijacking the topic (I hope not at least), this is sort of a question in the same vein, dealing with choosing and out of state CPA...                                                                                                                                               Assuming that you find a CPA that checks all the boxes for customer service, real estate expertise, etc... does it make sense to choose a CPA in a location that you would be willing to regularly travel to?

For example, if I live in Houston, and want to make a yearly drive (a la Camper Van) to Utah/Colorado to go mountain biking, could I set up a meeting in advance with my CPA that would allow me to deduct the travel expenses?   All I would be looking to deduct is the vehicle mileage and meals while traveling. 

@Brandon Hall, this may involve you!  :)  

I've found a house that appears to be unoccupied and in disrepair.  I've looked up the owner of record on the county tax records and attempted to make contact, but have had no luck.  I have found legal documents that suggest the owner of record may have been sent to prison about 15 years ago (and has 25 more years to serve).  The tax history shows that the owner of record quit paying taxes about 10 years ago, and since then a bank has been paying the property taxes. 

Is anybody familiar with this scenario??  Why is the bank paying the property taxes?  If the bank had been paying the entire time, I would have assumed it was the way escrow was set up, but the owner was paying the taxes for a while, and then it switched to the bank making payments.

2nd, it still appears to belong to the owner (ie not foreclosed).  Are there any unusual rules that govern properties when owners get sent to prison?  This is in Texas.

Thanks in advance for any help!

Thank you Larry. As a lot of new investors do (I think), I set up an LLC to own property in after reading "Loopholes of Real Estate". I somehow missed (I'm not sure it was very clear or mentioned at all) that you could only really own the property with an LLC if it was free & clear.

I've realized I'm not really making great use of the LLC. I've been trying to find ways to create asset protection still... like setting up a trust and making the LLC a beneficiary while I remain the trustee, but I'm not convinced that's a great idea either.

If it's just a sunk cost then, i'll chalk it up to a $700 lesson learned.  The question then is, do I let it expire, or will it come in useful down the road from here?

I have 2 rental properties. I have an LLC. My LLC has a business checking account. All of my spending and rental income flow through the LLC business checking account. However, none of the rentals are owned by the LLC. They are all still deeded to me (because I can't figure out a truly better option to owning them that isn't violating some kind of clause/agreement/law/etc).

I set the finance structure up this way, because I wanted to keep the finances clean.  

Please provide general comments, pros/cons, etc to this strategy.  Also, if you could answer these 2 questions, perhaps:

1.)  Am I allowed to withdraw money from this business checking account (to make use of my cash flow) or is that considered intermingling business with personal finances?  The whole purpose of investing for cash flow is to use it, so I hope so!

2.)  Am I setting myself up for trouble when it's tax time?  Am I adding tax complexity of a business without any added asset/legal protections of a business?

Please help a new investor!  Thanks in advance for your help!

Sincerely, 

Rob 

Hi everybody - My name is Rob and I've been a fan of the BP community for about a year now.  I've been listening to the podcasts on 1.5x trying to get all caught up on all the good information available.  But at almost 200 episodes, I've still got a long way to go.

A friend/coworker of mine finally convinced me to give this community a try after I talked him into checking out the MMM blog/forum.  Both have such great content, I'm amazed at how much time people are willing to take to help people that they've never met.  It's pretty amazing and humbling.

I'm a husband, employee, adventurer and Texan.  My wife and I are working hard to get some properties under our belt.  I'm looking forward to learning more from all the really knowledgeable folks on this community. 

There's so much to say, but this is only an introduction.  So I look forward to networking further with more people.

Cheers,

Rob