All Forum Posts by: Steve Morris

Well, on a straight sale, big things would be CapGains and then depreciation recapture plus whatever taxes your state assesses.

What do you want to do long-term with the property.  If you just have a trust with her and you, you could do work and then on her passing get a stepped-up basis?

Well, what does the lease say?  Usually, in most leases you can't make permanent changes to the building systems without your approval.  Also did they get permits since if wired wrong and it catches on fire you're on the hook.

If they have broked the lease, you need to give them written notice of same and they be subject to eviction.  I'd ask an atty first though since at a min, I'd unplug stuff.

Water bills are a killer and washing machines don't help.

If you're on decent terms with him can you get him to sign something to the effect of he's abandoning the furniture?  Make it a lot easier.

If you hire a prop mgr, why would you want to mess with the tenant?  

I think the intent is if the mgr, says the rent is $1100/month and then you tell the tenant $1000, it gets to be a mess.

"get Guardian. they can install the meters and handle the billing."

Forgot, if you get a 3rd party doing the billing, make sure they do collections also.  As noted, if you're on the bill for the meter you owe.

I've done it. If you want to DM me, I can send you some info on the suppliers.

It's about $175/unit for the meter, but you need to include install cost (cut, tap the water pipe).  If you have internet connection onsite the meter has 5 year battery and you can read it remotely.

The old versions basically had an outside meter in a lock box in parallel with the water line.  You'd have to go out and read it in the lock box to figure pro-rates.

Don't know OH law on rentals, but you may have to wait for a new lease to add a separate charge for water.

Forgot, CFBT = NOI - Debt Payments per period. So CFBT does reflect the loan payments.

As far as doing CapEx, that would be a cost affecting CFBT if you don't roll it into a cash-out refi. However, the assumption is that if you put $100K in a new roof and sell it the next day, you'd get $100K more than with the old roof so wouldn't affect your return that much.

"When calculating IRR should I account for equity accrual? Or do I only account for initial cash outflow and cash flows without principle pay down and appreciation?"

All IRR reflects is the imputed return on a series of cash flows.

Example on cash flows, first year is your down pmt, then each following year is your CFBT.  

The final year when you unwind and sell, your cash out will be the equity.  That would reflect price gains over the hold period and the reduction in principal owed thru amortization over the hold period.

And good point on the IRS audit, that's why the audit defense is usually offered as a premium service (i.e. a $100-$200 add on).

Well, I don't know if, you're giving tax advice, you can not be responsible if they go for an audit.   It's why your tax preparer usually needs to sign your return if they charge a fee. 

For example, those disclaimers on the back of a ride ticket?  You can't waive negligence, so if the operator screws up, no matter the disclaimer, he's still liable.

"How are rents determined every year by the government?"

Sec 8 funds come from HUD and then to the state H/As who distribute them to the local H/A to the tenant vouchers.

HUD has a whole staff that looks at rents for "average" income by county. This is how they dole out funds. The local HA needs to pay close to market rate otherwise, you wouldn't take the tenants. so they have some latitude on voucher amounts.

IF you buy  a property with an income restriction, you'll need to go thru compliance paperwork to ensure that the tenant meets income (eg in my county, avg income = $60K for 2 people).  Then they set the limit so tenant contribution is no more than 29% of their income.  60% AMI (most common) means the qual income is $36K for 2 people (avg income being $60K).  At 29% limit, that means about $870 month max.  Then you have to adjust for utility allowances.