Buy advertise then rehab
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Buy advertise then rehab (by Otis [IL]) Jan 9, 2019 7:06 AM
       Buy advertise then rehab (by S i d [MO]) Jan 9, 2019 7:42 AM
       Buy advertise then rehab (by Richard [MI]) Jan 9, 2019 8:19 AM
       Buy advertise then rehab (by David [MI]) Jan 9, 2019 8:29 AM
       Buy advertise then rehab (by Busy [WI]) Jan 9, 2019 10:41 AM
       Buy advertise then rehab (by Robin [WI]) Jan 9, 2019 1:41 PM
       Buy advertise then rehab (by Otis [IL]) Jan 9, 2019 6:38 PM
       Buy advertise then rehab (by Busy [WI]) Jan 9, 2019 11:33 PM
       Buy advertise then rehab (by don [PA]) Jan 11, 2019 9:00 PM
       Buy advertise then rehab (by don [PA]) Jan 11, 2019 9:00 PM
       Buy advertise then rehab (by Busy [WI]) Jan 12, 2019 2:27 PM
       Buy advertise then rehab (by Ray-N-Pa [PA]) Jan 13, 2019 7:45 PM

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Buy advertise then rehab (by Otis [IL]) Posted on: Jan 9, 2019 7:06 AM
Message:

So I used to buy fixer uppers, rehab and then rent the houses. But as you know doing this process makes all the rehab costs included with the basis for depreciation. After reading more about buying then advertising it for rent and then doing rehab, your costs can now be taken as deductions for that year.

For everyone that does it this way I have a couple questions. Most of the places I buy are not total gut jobs. Usually cosmetic...floors, paint, fixtures, fixing smaller issues etc. sometimes a roof.

Do you advertise the place as a dump for a lower price, then “decide” not to rent it at that price? Then do your rehab and rent for market price? Trying to figure out the process of advertising the dump to have it placed in service and then do the rehab without tripping flags for the IRS. --45.18.xxx.xxx




Buy advertise then rehab (by S i d [MO]) Posted on: Jan 9, 2019 7:42 AM
Message:

Otis, awesome thoughts!

I'm no expert, but this link seems to have a lot of helpful ideas. Consult your CPA for more info.

ttlc.intuit.com/questions/4406301-can-i-deduct-expenses-incurred-in-2017-readying-a-property-for-rental-in-2018 --173.20.xxx.xxx




Buy advertise then rehab (by Richard [MI]) Posted on: Jan 9, 2019 8:19 AM
Message:

Otis,

I'd recommend that you advertise it at full rental price for where ever it is located. As far as I know, there's no law against asking full price. Will you get that price? Who knows?

Lets say you don't. Say you advertise on Craigslist. The day you put it up for rent, you print out a few copies of the ad to prove it was offered for rent if you ever need to do that. Now that you have proved it,you can remove the ad. Remember that insurance companies hate empty houses. The rates and terms are much higher. On occupied places you can get loss of rents insurance which means if there is a loss, the insurance company pays you the rent you did not get. They don't do that on empty places.

So if no one will rent it at full price, your choices are either reduce the rent till it does get rented or fix the damages so it's worth full value. Now that you have established and proven that it was offered for rent, tax treatment of repairs is like you said, I believe.

There is no law I know of which says you cannot rebate part of the rent to someone who works on the property. Just make SURE you do it in the correct manner, and follow tax laws. You do not want all this under the table stuff that can create problems. Charge them full price and pay them for repairs. Great the tax reporting as the law says to.

If you decide to do the work yourself or hire others to do it, you might charge less rent.

As far as I know, There is no law that says what amount you must charge. So if you decide to reduce rent or rebate rent to $50 or $100 a month while the damage is being fixed, that's ok.

Now you actually have a tenant in place and the insurance company has no grounds to say the place is empty.

You might go to a thrift store or garage sale and spend a couple hundred to buy a bed, an old dresser, a couch, old tv, dining table and a couple chairs ,some silverware, pots and pans, dishes, clothes and towels, etc.You might have some of there things in storage left from previous evictions or tenants. Rent the place furnished with utilities included. No law against that. A few dollars at the grocery store will buy cans of vegetables, rice, ramen. Put them in the cupboard. A few bottles of water in the frig.

Some of my best renters in places that need repairs are single long distance truckers or out of town workers that are seldom home.

Now get busy and repair that damage! --23.121.xx.xxx




Buy advertise then rehab (by David [MI]) Posted on: Jan 9, 2019 8:29 AM
Message:

neat trick! --198.135.xxx.xxx




Buy advertise then rehab (by Busy [WI]) Posted on: Jan 9, 2019 10:41 AM
Message:

My most profitable property came with a tenant. Bank had decided better to have properties occupied while waiting to sell the foreclosure, than keep having break-ins. At that time, as a new landlord, (still fairly new

, started in 2012, 3 rented properties,) I would not have rented that house in that condition., however, since tenant was there....

Five years later, I still have that same tenant. AND, I have almost rehabbed the house. It really helped that tenant is of a similar personality to me, we get along. She convinced me to start changing windows, she had done it previously with her husband on a duplex they owned, before they divorced.

My issue with buying a property, placing a tenant, then working on rehab, is, any applicant that would accept a property in that condition, wouldn’t meet my screening requirements. That tenant placed by the bank would not have met my requirements at that time. But, the bank had already placed her, and, during the interview process, of due diligence, I thought I could work with her. , so bought the house.

Turned out to be very, very good move. She and I have been through some very rough times, but, we kept communicating. We always kept it civil, key to that is to extend respect over and over, set the example of good decorum.

So, Because of my experience with one tenant, I redefined my screening criteria. And, may have found a sweet spot for me. Tenants that aren’t perfect, but show a penchant for improving. So far so good, but, I only have a few properties up and rented.

I also have a property that I bought waaay too rough, and am slowly redoing it. Life got in the way a bit, Renos at the other houses took precedence. It should be rentable this year, and yup, four years of receipts will all go into depreciable basis. Don’t think I’ll repeat that mistake!

So, looking into my future, I see myself buying a property, getting a tenant with some issues, but that I feel I can work with in right away.

Rehabbing with a tenant in place is much slower, more costly. On the house I rehabbed with the tenant, I redid the bathroom, as flooring was disgusting, plumbing was a hot mess. I pulled the toilet and vanity after the family left for work and school, got a little work done, and put it all back before they came home. For days. Second to last day, I dropped the toilet. Only toilet in the house. A perfectly good toilet. A nice toilet. A toilet I wasn’t going to replace. Ten minutes before the kids got off the school bus.

Would I do that rehab that way again? Absolutely! Even with paying for an extra toilet, keeping the property in service kept money rolling in. It helped tremendously that house has no lead on the inside, as far as I have come across, and I’ve tested a lot with 3M tests.

Finding the tenant , to me is the tricky part. I have a tenant at another house that cannot stand mess of any kind. I have done a few major projects at her house (basement foundation repair, changed back doors, but because of goofy construction of my houses, framing had to be redone.) For that tenant, I haven a pro come in to do the work, so it goes very quickly, and I often give tenant $40 to take the kids out for supper, if the project goes over two days. Again, more costly than doing that with out tenant in place, but, since the cash stays flowing, the numbers still work.

There will be some projects that just have to be done between tenants, unless I feel like sending them to a motel for a week. Not all tenants would be suitable for doing lots of repairs, but might want to stay. Then, it becomes time to adjust my rehab schedule, or move a tenant along. --70.92.xxx.xxx




Buy advertise then rehab (by Robin [WI]) Posted on: Jan 9, 2019 1:41 PM
Message:

Repairs/improvements that I've done AFTER the tenant moved in/signed lease:

window replacement

kitchen floor replacement

basement wall rebuild (that one didn't go so well)

roof replacement, gutters, siding

furnace and water heater replacement

floor refinishing (after lease signed, but before move-in)

landscaping/yard work

Another way to do this that I haven't done: tenant signs lease on Aug. 1 for Sept. 1 move-in. You start the lease on Aug. 1 but give them the month "free". Rehab like crazy during the "free" month.

Usually people start looking a couple of weeks before they're ready to move. My strategy is to fix all the visible stuff (paint, flooring, ugly tub), hold an open house, and then finish the less-visible stuff (old shut-offs, water heater, leaky faucet, exterior issues).

--204.210.xxx.xxx




Buy advertise then rehab (by Otis [IL]) Posted on: Jan 9, 2019 6:38 PM
Message:

Thanks for the replies. Just trying to figure out a way to move some costs from being depreciated in the capital basis to being expensed in that year without buying and storing inventory since I use pretrybmuch the same materials in all the houses.

--45.18.xxx.xxx




Buy advertise then rehab (by Busy [WI]) Posted on: Jan 9, 2019 11:33 PM
Message:

Robin, how’d you manage the kitchen floor? Would you do that one again with tenant?

Mine needs doing in that house I was discussing. Of course, I have three layers, one probably asbestos. --70.92.xxx.xxx




Buy advertise then rehab (by don [PA]) Posted on: Jan 11, 2019 9:00 PM
Message:

Not worth it. Look into the fed RRP lead paint regs and penalties. Doing the work before you rent it, no one to complain unless you anger the neighbors, and you can always claim that you intended to live in it so RRP does not apply.

Start disturbing possibly lead paint with a tenant in there and if the kid tests hot for lead, or even if things go bad, EPA and local authorities will be all over you.

Also, in general, it is just a lot easier to work on an empty place. Less stress to get it done quick, can work all night if you want, make noise, etc.. --73.141.xxx.xxx




Buy advertise then rehab (by don [PA]) Posted on: Jan 11, 2019 9:00 PM
Message:

Not worth it. Look into the fed RRP lead paint regs and penalties. Doing the work before you rent it, no one to complain unless you anger the neighbors, and you can always claim that you intended to live in it so RRP does not apply.

Start disturbing possibly lead paint with a tenant in there and if the kid tests hot for lead, or even if things go bad, EPA and local authorities will be all over you.

Also, in general, it is just a lot easier to work on an empty place. Less stress to get it done quick, can work all night if you want, make noise, etc.. --73.141.xxx.xxx




Buy advertise then rehab (by Busy [WI]) Posted on: Jan 12, 2019 2:27 PM
Message:

‘Can work all night, make noise...’

That reminded me of my first time renting. Tenants were moving in November 1, I was finishing last minute details , scrubbing stains off the bedroom floor, late into evening on October 31. Halloween. Listening to ghost stories on the late night radio station. In the bedroom where the last owner had died almost exactly one year earlier. Oohhhh....ooo..ooohhhh --70.92.xxx.xxx




Buy advertise then rehab (by Ray-N-Pa [PA]) Posted on: Jan 13, 2019 7:45 PM
Message:

Otis,

You can establish the market rent for the specific material condition. I am assuming you are discussing BRRRR. It is true that adding in the marketing allows you to deduct more, but after the latest tax reform act, what are you trying to deduct that you can't take bonus depreciation on?

So it might matter for your state taxes, but on the federal level, BRRRR and BARRRR work the same.

Good on you for doing the light level rehabs, you might find out that a prehab or a flip might net you more cash for doing less work than a rehab --72.23.xxx.xx



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