All Forum Posts by: Steve Morris

"the bankers said they would have more lending flexibility if I had my accounts with them."

NOT A LENDER - However, when they make loans on investment properties, two big things they look at:

1) Value of the property and ability to service the debt.  That shouldn't change beyond diff underwriting stds of each bank AND

2) Personal side. Are you a reliable risk personally or thru your LLC. They also like income, so may drop the rate if you do a bunch of other business. Kinda like, you deposit $10M, they'd love to loan you back $2M of that.

"we are not sure if we can shot off the utilities on Tenants move in date."

I think you mean switch over billing.  Shutting off is a long (in OR) process.  I would just call the utility and then tell them that on the 6th (if that's the move-in) to go out and do a final reading and then the payment is the tenant's responsibility at his mailing address.

Make sure they understand you are the owner, just so you get notified if the tenant doesn't pay.

AM NOT A CPA OR TAX PROFESSIONAL.

My main thing would be to get with a CPA and make sure you structure this right.  If you are just doing all this to flip it, it may be treated as "inventory" which gets you worse tax treatment (like as ordinary income vs. CapGains.)

If it is CapGains (NOT ordinary income), you'll need an accounting anyways.  You need to figure the basis + cost to buy + Capital Improvements (things you do that are depreciated instead of expensed).  

If you DON'T take depreciation, then when you sell and get an adjusted sales price you need to take out your adjusted cost basis (without depreciation) to get appreciated CapGain.

If it's CapGains, then you need to look at what bracket you're in to figure your rate which could be up to 20%.  Then you add in about 4% for MediCare tax and if your state (like OR) has income tax, they get a slice.

TLDR - GO TALK TO A CPA/TAX PROFESSIONAL BEFORE YOU DO ANYTHING.

I guess I'd look at it as an emergency fund.  The rates will be higher than a cash-out refi, but you're not using it to make investments with.

"what are subscribe services? You mean to call buildium and other landlord software selling places?"

Yes, AppFolio, cozy, etc.

Just make sure they understand what you want out of the app and then understand how they do that.

Would not help the tenant with his truck, since you may be implying responsibility for what happened.  Sorry, that's the way courts look at stuff now.  

In addition, you may want to look at your lease to make sure you're not creating a bailment for his property since all tenants should have renters insurance on possessions (truck doesn't fall under this, however).

You may want to consider signs/cameras from here on out though.  Giving the tenant access.

Well, right now lenders are all up in a tizzy over COVID.  I think I'd wait until stuff sorts itself out and you'd get a better rate/terms.

I'd also talk to a mortgage broker since they look at all rates not just their own like banks do.

Well, I guess it's possible, however, there's got to be a gotcha, either in fees (if they don't call it down payment) or interest rate (well above market).

Have them give you a rate/terms sheet.

I'd be curious also.  There are places that will do cost segregation studies on parts of the improvements on a shorter schedule (5- or 7-years depreciation).

However, have not heard of someone being able to go to the mat with IRS and get the whole property depreciated over 5 years.

Plus you'd have to figure if it's worth it since you'll be paying a lot bigger depreciation recapture after 5 years plus CapGains.

In general - Unless you know the property has only skin-deep stuff you can fix FOR SURE - I'd hire an inspector to look for stuff like foundation issues, moisture invasion, everything is to code, major mechanical stuff, life on expensive stuff like HVAC/roofs.

MHs a little easier though, but don't know the level of rehab you want to do.