All Forum Posts by: Ty Coutts

Hi Stacy,

I understand your concerns about the complexities of splitting rental income and expenses. Here’s how you can simplify the process and achieve your goals, while also exploring financing options that could benefit both Cousin A and Cousin B.

Tenants in Common Agreement: While Cousin A and Cousin B will technically need to report rental income and expenses according to their ownership shares, a well-structured Tenants in Common (TIC) agreement can outline how they handle income and expenses. This agreement can specify that Cousin B manages all rental activities and reports the rental income and expenses.

Property Management Agreement: Cousin A can hire Cousin B as the property manager for the rental portion of the house. This way, Cousin B handles all the rental operations, and the agreement can state that Cousin B receives the rental income and pays for all related expenses. This could streamline the process and align with their goal of Cousin A cashing out equity.

Consulting a Tax Professional: It’s crucial to consult with a tax professional to ensure this arrangement complies with IRS regulations. They can help structure the agreement to reflect the intended income and expense allocations correctly.

Financing Options: As a mortgage broker, I can assist in exploring financing options that suit both cousins. For Cousin A, this could involve cash-out refinancing to access the equity they need. For Cousin B, we can look into mortgage options that facilitate the purchase of the 50% interest in the property. Again, feel free to reach out if you need anything else!

Hi Manuel,

It sounds like you have a solid plan in place for addressing the renovation and humming sound issues. Given your situation, you might want to explore refinancing options or a home equity loan to cover the renovation costs. Let me know if you want to discuss! Please feel free to reach out to me directly.

Hi Victoria,

Yes, running a credit report on the buyer is highly recommended. This helps you assess the buyer's creditworthiness and ability to make timely payments. There are definitely some key points to consider with this though such as Income Verification, References, Terms and Conditions that I would recommend having. Please feel free to reach out to me directly if you would like to discuss or need further assistance!

Perfect! I think that my service would help you with this situation if you are interested. Please give me a call if so. 

Hey Ashley,

Section 8 provides a subsidy to low-income tenants to help cover their rent, with the amount varying based on factors like local housing costs and tenant income. In your case, where your rental rate is $2300 for a 3-bedroom unit and the maximum voucher amount is $1650 per month according to local resources, there's a notable gap. While tenants aren't required to pay the difference between their voucher and your rent, they are responsible for their portion, typically based on their income. Consistent non-payment by tenants can result in penalties or even the termination of their voucher, incentivizing compliance with payment responsibilities.

As a landlord, it's crucial to assess the financial feasibility of accepting Section 8 tenants given the rent differential. You might consider adjusting your rental rate, negotiating with potential tenants, or exploring alternative rental assistance programs that could cover a higher portion of the rent. While Section 8 offers benefits like guaranteed rental income and a larger pool of prospective tenants, there are administrative requirements and potential differences in payment expectations to navigate.

Before making a decision, conduct thorough tenant screenings to ensure tenants meet your rental criteria beyond their Section 8 status. This includes verifying income stability, rental history, and conducting background checks as permitted by law. Consulting with local housing authorities, a real estate professional, or a Loan Officer (such as myself) experienced in Section 8 housing can provide valuable insights and guidance tailored to your specific situation, helping you navigate the program effectively while protecting your financial interests as a landlord.

Let me know if you would like to discuss further or if you have any more questions I might be able to answer. Please feel free to reach out to me directly if so. 

Hey Stacy,

In the scenario where Cousin B buys 50% of Cousin A's primary residence as tenants in common, rental income and expenses typically follow each owner's ownership percentage. Cousin A, who continues to reside in one half and rent out the other, will report rental income and expenses for their portion on their tax return. This includes declaring rental income received and deducting applicable expenses such as maintenance, property taxes, and mortgage interest related to the rented portion.

Once Cousin B acquires 50% ownership, they will begin reporting 50% of the rental income and associated expenses for the portion they now co-own. This division is standard unless Cousin A and Cousin B agree to a different allocation of income and expenses in a written agreement. Such an agreement should detail how rental income and expenses will be split to avoid discrepancies and comply with IRS regulations.

It's essential for both cousins to adhere to IRS guidelines, which require accurate reporting of rental income and expenses based on ownership percentages. Consulting with a tax professional can provide tailored advice to navigate the tax implications of this arrangement, ensuring both parties understand their reporting responsibilities and maximize tax efficiency within the tenants-in-common framework.

Hope this helps! If you would like to discuss further or have anymore questions please feel free to reach out directly. 

Hi James,

We at Aslan do these types of mortgages, however there are some limitations for most lenders.

For FHA, VA, and Conventional Energy Efficient Mortgages the property must be occupied as the borrower's primary residence, so they are not eligible for investment properties. Most lenders, will not be able to do this as from your post it does not seem like you are looking to use this property as your primary residence. However, we do have a large breadth of products at Aslan Home Lending, and we will be able to find something that would work for you, although it may not be exactly what you are looking for.

Let me know if you would like to discuss further! 

Hello, Albert Lubin, the 50% rule is a general guideline used by real estate investors to estimate the operating expenses (OpEx) of a property as a percentage of Effective Gross Income (EGI). Effective Gross Income is the total potential rental income minus vacancy and credit loss. The 50% rule states that approximately 50% of EGI will typically be consumed by operating expenses.

While the 50% rule provides a quick estimate, actual expenses can vary widely depending on the property type, location, age, condition, tenant mix, and market conditions.

Here's an example: if a property generates $200,000 in EGI per year, the 50% rule suggests $100,000 would go towards operating expenses like taxes, insurance, utilities, and property management. However, an additional amount should be set aside for CapEx and repairs.

While the 50% rule provides a useful starting point, it’s essential to recognize that it primarily covers operating expenses and not CapEx or repairs. For a more accurate financial projection, factor in these additional expenses separately. Tailor your analysis to the specific property and market conditions to make informed investment decisions. I hope this finds you well!

Hey, Christopher Berra, I love how you navigated the project, and can tell that you care all about profit. I would love to hop on a call with you to discuss lending options for your future projects, because financing your properties to the best of your ability will greatly benefit the profit of your projects. Call me anytime at the number below. 

Hope to hear from you, have a great day!

Hey Joey, 

Here is my understanding of the subject:

Key Components of a "Subject To" Offer:
Clear Identification of Conditions: Clearly state the conditions ("subjects") that must be satisfied for the offer to be binding. These conditions typically protect the buyer and ensure certain requirements are met before finalizing the sale.

Contingencies to Consider:

- Financing Contingency: Specify that the purchase is subject to the buyer obtaining satisfactory financing. Include details such as the type of loan (conventional, FHA, VA) and the maximum interest rate acceptable to the buyer.

- Home Inspection Contingency: Include a clause allowing the buyer to conduct a professional home inspection within a specified timeframe. Outline that the sale is contingent upon the inspection report being satisfactory to the buyer.

- Appraisal Contingency: State that the purchase is contingent upon the property appraising for at least the purchase price. If the appraisal comes in lower, the buyer may have the option to renegotiate or withdraw from the offer.

- Title Contingency: Include a contingency that the buyer receives clear and marketable title to the property, free of any liens, encumbrances, or legal issues.

- Seller Disclosures: Specify that the buyer's acceptance is subject to reviewing and approving all seller disclosures and documents related to the property's condition and history.

Timeline and Deadlines: Clearly outline deadlines for completing inspections, securing financing, and satisfying other contingencies. This helps ensure the transaction progresses smoothly and in a timely manner.

Earnest Money Deposit: Specify the amount of earnest money the buyer will deposit with the offer. This demonstrates the buyer's seriousness and commitment to proceeding with the purchase.

Additional Clauses:

Subject to Sale of Buyer's Property: If the buyer needs to sell their current home to finance the new purchase, include a clause making the offer contingent upon the sale and closing of their property.

Specific Repairs or Improvements: If the buyer has identified specific repairs or improvements they want completed by the seller, include details about these requirements as conditions of the offer.

Review by Legal Counsel: Consider having the "Subject To" offer reviewed by a real estate attorney to ensure all contingencies are clearly defined and protect the buyer's interests.

Final Steps
Negotiation: Once the offer is submitted, be prepared for negotiation with the seller. They may counteroffer or request modifications to the conditions outlined.

Documentation: Ensure all parties sign and agree to the terms of the offer in writing. Keep copies of all documents related to the offer and any amendments made during negotiations.

Hope this helps! If you have any further questions or need any assistance please feel free to reach out to me directly!