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Leperflesh posted:Jesus christ. Do not buy a house when you have no income! If your friend decides to stop paying for any reason, you will be responsible for the whole house. If you have no income right now, you cannot qualify for a loan, anyway. Don't blow all your savings on LA real estate! Haha, yeah apparently I didn't get the memo that you can't buy a house anymore without any income. Basically my costs will be what I currently pay in rent + maintenance. The figure I quoted of 2060 included insurance and tax. Not sure about earthquake insurance though. Leperflesh posted:Your friend is a moron for agreeing to such an arrangement. If you fail to make payments, he'll be stuck with the whole house! Which he doesn't live in and isn't even in his own state! Yup, you're right he is taking on a lot of risk. He's putting up the down payment too. He can afford the whole thing on his own easily though. quote:What tax benefit? There's no tax benefit for people with no income! You have no income! I'm living on my 401k right now, and am planning on getting a job within a couple of months. So my income will be pretty low for this year. Eventually though, having that tax deduction for interest payments will be quite helpful. quote:This whole arrangement sounds incredibly stupid to me. I hope you do not feel insulted by my assessment but I predict that everyone else in the thread is going to be with me on this one. No insult taken. Thanks for the honest assessment. Well, my friend is taking on a lot more risk than I am. Really I just want to know whether I can get the deduction for making interest payments on a loan that isn't mine.
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Apr 28, 2011 22:32
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Remember that the deduction is as compared to the standard deduction, all else being equal. That said: I don't know the answer (of whether you qualify for the deduction at all, assuming you have income at some point).
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Apr 28, 2011 22:35
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I guess I should also say that he wants to buy the house whether or not I'm interested going in on it with him. Another option is for him to buy it and rent it to us while giving me a discount on rent for managing the property. If this were the case though, he would be taxed on the income from my share of the rent. One other thing with the house is that there's currently tenants there that are on this ridiculous 4 year lease at 1500$ a month that ends next November. The house was foreclosed on last year. If he were to buy the house as rental property, he would have to let them stay there for the rest of the lease at a loss of about 18k. If I'm part owner and move in, then we are allowed to break the lease with 3 months notice. The situation with the current tenants is one of the reasons why the house is so inexpensive. The house has already dropped out of escrow once because the buyers did not want to deal with having to get rid of the tenants. I don't foresee too much of a problem though, they seem to be pretty reasonable people. The loan officer said that I would be able to deduct the interest paid even if it isn't my loan and that the tax form they send to the IRS only lists one person anyway even if multiple people are on the loan. I just wanted to check on this. Boxbot fucked around with this message at 22:52 on Apr 28, 2011 |
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Apr 28, 2011 22:49
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Oh god it just keeps getting better and better 
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Apr 28, 2011 22:52
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This is a frighteningly stupid decision you are making, though not as stupid as your friend's decision.
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Apr 28, 2011 22:52
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Boxbot posted:The loan officer said that I would be able to deduct the interest paid even if it isn't my loan and that the tax form they send to the IRS only lists one person anyway even if multiple people are on the loan. I just wanted to check on this. Loan officers lie. A lot. Ask a tax attorney or accountant about this if you want a real answer and not some lie that's calculated to get you into a mortgage. My bet is that you can't deduct the mortgage interest, but he can deduct it against the money he makes renting it.
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Apr 28, 2011 22:55
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Well, here's a question. If buying a house for rental income. What should the rent be compared to the monthly costs, mortgage, tax, management etc to make it worthwhile?
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Apr 28, 2011 22:56
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Boxbot posted:No insult taken. Thanks for the honest assessment. Well, my friend is taking on a lot more risk than I am. Really I just want to know whether I can get the deduction for making interest payments on a loan that isn't mine. I'm certainly no expert, but I would expect the answer to be "No." In most cases you have to be legally liable for a loan before you can deduct interest. Maybe your state is different, but I would talk to someone who knows a lot about taxes before trusting the loan officer.
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Apr 28, 2011 23:01
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Boxbot posted:Well, here's a question. If buying a house for rental income. What should the rent be compared to the monthly costs, mortgage, tax, management etc to make it worthwhile? I guess you could manage the the taxes such that even with a lower rent you could come out ahead.
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Apr 28, 2011 23:02
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Jorath posted:The rent should be more. Otherwise it's not 'rental income', it's an expense. Well, not necessarily right? I mean, You may be losing some cash but you are gaining equity.
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Apr 28, 2011 23:05
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Boxbot posted:Well, not necessarily right? I mean, You may be losing some cash but you are gaining equity. If the rental income does not exceed the monthly cost of the property then every month you will be paying out of pocket to cover the difference, and you will never build a buffer for emergency fixes or necessary repair work when a tenant moves out. You may build equity (a tiny amount of it), and you may be able to work the taxes out at the end of the year to get it back in write offs, but you may also still be paying several hundred a month out of pocket to let someone else live there. I know you aren't interested in hearing anyone's opinion on how bad of a decision you're making, but for the love of god this sounds like a terrible idea.
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Apr 28, 2011 23:20
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Boxbot posted:Well, not necessarily right? I mean, You may be losing some cash but you are gaining equity. Your break-even point will be a looooooong way away if you're paying someone else to live there until you're not making mortgage payments anymore. It's better than buying a house to have it sit empty until you pay it off (probably, unless you get destructive tenants), but it's still a very poor use of capital.
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Apr 28, 2011 23:24
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Don't forget that you (the seller) must pay 6% of the sales prices when you sell the house, in commission to the agents. That's on top of all the other costs of selling a house. So if you plan to sell in, say, 6 years, you must collect 1% of the house's value each year in profit on top of the breakeven on the other costs, just to break even after you sell. You also of course have to make up the sunk transaction costs from buying. All this of course is also assuming that the house doesn't go down in value. Which it might. It very well might.
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Apr 28, 2011 23:55
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Well, thanks for all the advice. I'm thinking now that maybe I'll just rent from him.
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Apr 29, 2011 00:07
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Chin Strap posted:And 46% of net being 30% of gross implies an effective tax rate of almost 35% which is impossible unless you are making millions. At a generous 46% of net being 35% of gross you are still looking at a 24% effective rate which is 150k per year (which he probably isn't). I'm using a different gross income definition though. My net income represents about ~71% of my gross income, which does not imply that my effective tax rate is 29% because you have to factor in other deductions like insurance and retirement accounts. The generic rule for housing is that it should not exceed 1/3 your gross income. My yearly gross income is about 36k, my mortgage ($981/month and over half of that is HOA and property tax) would be $11,772 per year and roughly 33% of my gross income. I'm not saying the 1/3 rule is right for you, it's just what banks will generally look at as a starting point. Consider yourself lucky if you live in an area where you can afford any housing at less than 1/3 of your gross income. I am living dirt cheap for the Chicagoland area, trust me. edit-more poo poo, and cleaned up to sound less dickish. The Shep fucked around with this message at 05:43 on Apr 29, 2011 |
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Apr 29, 2011 00:30
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Boxbot posted:Well, thanks for all the advice. I'm thinking now that maybe I'll just rent from him. Holy poo poo! Well that's awesome. Thanks for climbing out of the well, dude!
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Apr 29, 2011 02:05
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Cmdr. Shepard posted:I'm surprised you're not understanding how gross income works since this has been explained in the thread over and over. My net income represents about ~71% of my gross income, which does not imply that my effective tax rate is 29% because you have to factor in other deductions like insurance and retirement accounts. These are different definitions of gross and net income than what I am used to. But fine whatever with those definitions i guess 33% doesn't feel quite so bad.
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Apr 29, 2011 02:16
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Boxbot posted:Well, thanks for all the advice. I'm thinking now that maybe I'll just rent from him. Noooooo I was looking forward to your personal financial crisis topic in six months 
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Apr 29, 2011 03:16
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Just sold my Vancouver, BC condo. 120k profit, held for 6 years. I'm taking the money and running for the hills.
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Apr 29, 2011 06:26
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I am of the opinion that being a small scale landlord is one of the worst investment decisions you can make. The risk is absolutely massive, a bad tenant can easily cause tens of thousands of dollars worth of damage. Tenant screening services can help, but you are still betting that one person will be willing and able to pay their rent. You'll be paying retail for any maintenance that needs done as well. I wouldn't get into that business unless you have at least a dozen properties and are prepared to run it like the small business that it is. At least then you can negotiate maintenance on a contract basis or even bring someone on as an employee or independent contractor to do small stuff. Plus, if you have to evict one bad tenant, you won't be as badly screwed because you have many others paying rent.
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Apr 29, 2011 07:26
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First off, I'd appreciate it if you'd refrain from hyperbolizing (yeah I know that's not a word) my arguments. You're projecting onto them a lot of stuff that isn't there. You seem to be stuck in the mindset of H>V. There isn't a pool of homogeneous ideal buyers, like the home design shows on that network seem to insinuate. There is a very limited pool of buyers with specific tastes for any given price point and location. Leperflesh posted:That's... kinda crazy. The seller agreed to that? Like, your brother said "hey I see you put in carpeting but I'd rather have hardwood. I demand you take $2k off the price" and the seller didn't tell him to take a hike? That's really weird. If your brother didn't want carpeting that's his business, but you can't go around looking at houses and telling the owners they should lower the price because you don't like a feature of the house. "Hey, you put in a lawn, but I want a cactus garden! Gimme a discount!" Leperflesh posted:That is certainly true. However, if you buy an inexpensive but reasonable water heater and have it installed, its very unlikely that you're wasting your money vs. leaving a broken water heater in place. Either the buyer will be fine with your choice, or they can pay to upgrade it, but they have no grounds to demand a reduction in the price of the house over your choice of water heater. Let's say your house gets bought by a family of 6 that needs a larger hot water heater. They can't exactly get the money back that was spent on the low-capacity grade hot water heater. It has exactly $0 in value to them. Why would a buyer make a higher offer on your house because of something that has no value to them? Leperflesh posted:And if your friend doesn't like the windows in a house she is considering, again, that's not grounds for a discount; it just means she either needs to pick a different house, or, be prepared to spend the money out of her own pocket. You don't get to dictate to sellers what you want the house to be. You can dicker over repairs quite a bit, though, since you have an inspection contingency and can walk away from an offer over anything that fails inspection. Also, in some states you can't simply walk away from an offer you placed on a house for any reason unless you pay for the privilege.
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Apr 29, 2011 13:12
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I just closed on my house yesterday and got close to a 9% raise at work on the same day! That lessened the sting of parting with my down payment somewhat.
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Apr 29, 2011 18:39
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Dik Hz posted:Why would a buyer make a higher offer on your house because of something that has no value to them? Since this is the crux of the argument I'm just going to address it directly. In my opinion, a given property has a theoretical baseline value, that assumes nothing in the house is actually broken. Anything that is broken subtracts from that baseline value. Certainly there are options when fixing a thing that may or may not bring the house above that base, but that is (in my narrow definition) an upgrade, not a repair. You seem to be arguing that instead, a house has a baseline value regardless of whether anything is broken, and that anything that was fixed in a way undesirable to a potential buyer subtracts from the value. E.g., you are explicitly saying that fixing a broken thing can fail to raise the value of the house. I think I'm right and you're wrong. But perhaps I'm misinterpreting you. I don't think so, though. I'm content to leave it here, though, if you are.
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Apr 29, 2011 18:52
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Leperflesh posted:You seem to be arguing that instead, a house has a baseline value regardless of whether anything is broken, and that anything that was fixed in a way undesirable to a potential buyer subtracts from the value. E.g., you are explicitly saying that fixing a broken thing can fail to raise the value of the house. To certain people sure. The way I see the final cost is the initial cost + whatever you would have to put into it to be content with the place. I would ask discounts on the initial price to reach some goal final price. Suppose they painted the whole place baby poo poo green. It is a fresh coat of paint, but it adds absolutely no value unless you are fine with staying with baby poo poo green. To you the buyer it will cost just as much as if there hadn't been new paint.
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Apr 29, 2011 19:00
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I think he's saying that a house is worth whatever price it can be sold at and that it has no true intrinsic value. The confusion appears to be springing from his assertion that if they see something they don't like they're asking for a "discount" rather than just lowering their perceived value of the house. The seller isn't discounting it as much as the buyer is saying "this house is now worth $X less to me in its current condition". If the seller agrees to that lower price, congratulations, that is what the house is worth. I disagree that a property has any true baseline value, but I do agree that you can reach a price in which a large percentage of buyers would be willing to pay to purchase it, which basically means the same thing in practice.
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Apr 29, 2011 19:03
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Well, but we're not talking about painting over perfectly good white (or whatever) paint. We're talking about baby poo poo green vs. bad paint that must be repainted. Like, so bad it falls into the realm of "broken". But I guess yeah there's some repair options that are so awful they could detract from the house, sure. Did I really need to be explicit about that? Like, hey, always repair stuff, unless you're a retard that would repair a thing with an option universally held as tasteless or awful? Dik Hz used the hot water heater example though, to argue that you shouldn't fix anything because in theory some potential buyer might not like your choice and therefore will bid less because of it. But I don't think that's really true, on balance. I think far more buyers will discount the house (perhaps disproportionally) due to a broken appliance, than buyers that will discount the house because they are mentally calculating the cost of all the changes they're going to want to do to it. So OK, would you guys be happy if I modified my statement to say, always repair stuff, but don't be a retard about how you repair it? Pick something generally acceptable to normal people that buy houses, rather than a repair choice that's likely to turn off potential buyers (like, say, wall-to-wall builder-grade carpeting instead of nice carpet)? edit: Sophia posted:I disagree that a property has any true baseline value, but I do agree that you can reach a price in which a large percentage of buyers would be willing to pay to purchase it, which basically means the same thing in practice. Oh absolutely this is the case. If you offer a house for sale "best offer" and attract no offers, then the house is literally worthless. What I am getting at is the idea that broken stuff tends to reduce the market's assessment of your house by at least as much, and often far more, than it would cost to make a basic, neutral repair of that broken stuff. I think buyers tend to act with emotion more than rational assessment, and that anything you can do to improve the visceral reaction of potential buyers to the house is going to pay substantial dividends. I think broken poo poo has a disproportionate impact on that visceral reaction. I agree that, in theory, it's possible to repair something in a way that makes it less desirable than it was broken (baby poo poo green paint is a good example), but I've been operating on the assumption that the Goons reading the thread are at least intelligent enough not to do that kind of thing when they're thinking about selling their house within the next year or two. Leperflesh fucked around with this message at 19:23 on Apr 29, 2011 |
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Apr 29, 2011 19:17
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Well, I learned while my parents were selling their house recently that the new big thing (at least in Illinois and Indiana) is to not change or fix anything at all (particularly colors, carpet, or anything cosmetic), but provide a monetary allowance for the new buyers to do it. Buyers love that because then they feel like they're getting free money, and sellers don't have to worry about losing out on cash that's ultimately not worth it. My parents ended up doing that and it was a big help in selling. Edit: I think you might be right when it comes to things that people in general don't have strong opinions about (water heaters / furnaces being a good example), but when it comes to something that people will mostly really care about, like carpet vs. hardwood vs. tile, or the color of the walls, it's better to just leave it as is. Your overall cost will likely be much lower if you don't try to fix it than if you do. Sophia fucked around with this message at 19:26 on Apr 29, 2011 |
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Apr 29, 2011 19:23
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I suppose one problem here is that, since every house sale involves an (essentially) unique house, and a unique buyer, it's impossible to prove either case (you can't really set up a controlled experiment to show that unrepaired stuff winds up costing the seller less than repaired stuff). So this is going to be a matter of opinion.
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Apr 29, 2011 19:25
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Shoppers since the bust are going to be a lot more picky, and probably a lot better informed on the whole than they were 3+ years ago. This makes me think that leaving marginal things is probably a better idea than it was, as buyers know what they can change, what it costs, and are possibly more likely to want to make changes too.
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Apr 29, 2011 22:46
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Leperflesh posted:Dik Hz used the hot water heater example though, to argue that you shouldn't fix anything because in theory some potential buyer might not like your choice and therefore will bid less because of it. Objecting to "Always fix everything" does not imply I support "Never fix anyting". I'm saying you should talk to a professional homebuilder or real estate agent and establish what fixes would add value, and which might necessitate stylistic decisions that might not be recouped on sale, or might even alienate a subset of perspective buyers. Leperflesh posted:What I am getting at is the idea that broken stuff tends to reduce the market's assessment of your house by at least as much, and often far more, than it would cost to make a basic, neutral repair of that broken stuff.
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Apr 30, 2011 01:06
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What about a roof? Shingles come in all sorts of shapes and sizes, but I bet a house with a leaky roof would sell for a lot less than the cost to re-shingle. Also, while alot of personal touch fixes (fresh paint, new flooring, ect) might not pay for itself when selling, it might increase the speed with which the house sales, which can be huge. That being said, I think this whole discussion is completely relative to the buyer, and weather or not they want a turn key property or something they can personalize immediately.
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Apr 30, 2011 02:00
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You can always split the difference and say "We'll buy and install any type of flooring you want up to a value of X before you move in."
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Apr 30, 2011 06:36
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Dik Hz posted:Prove this statement. Leperflesh posted:I suppose one problem here is that, since every house sale involves an (essentially) unique house, and a unique buyer, it's impossible to prove either case (you can't really set up a controlled experiment to show that unrepaired stuff winds up costing the seller less than repaired stuff). So this is going to be a matter of opinion. I obviously can't. This is a matter of opinion.
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Apr 30, 2011 08:20
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Leperflesh posted:I obviously can't. This is a matter of opinion.
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Apr 30, 2011 13:20
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Leperflesh posted:I obviously can't. This is a matter of opinion. I think you can. There is an entire industry built up from doing just what you are asserting. Flipping relies on doing the least amount of repairs to get a profit. They don't just buy a house and relist at a higher price do they?
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Apr 30, 2011 14:39
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Those are all completely subjective. So your brother wanted the damaged hardwood and no carpet, great. Maybe there was another family that wanted to do nothing to this house they just bought and wanted the builder grade carpet. Who knows which person is showing up and wanting to buy your house? Personally, when I sold my first one, I went overboard making sure it was show quality, since it was competing against other houses for an offer. I believe that if you are trying to sell something, you make drat sure it is at least as good, if not better than, whatever you are selling against... That seems like a no brainer. If you want to leave damaged things showing, more power to you. As a seller, I loved seeing houses with obvious defects in my sellig range. And I looked, too - I went to all kinds of open houses in our listing range to compare. Edit: anecdotal, I know, but I sold it six months post bust for 50k more than I had bought it for four years and roughly 15k in improvements (DIY finished basement, hardwood, tile, etc - counting my time as free since I enjoy that kind of thing) later. This is in Louisville, if that matters. let it mellow fucked around with this message at 01:52 on May 1, 2011 |
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May 1, 2011 01:47
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Anyone know if tub boxes should be level in the slab? http://www.oatey.com/Channel/Shared/ProductGroupDetail/68/Tub+Box.html
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May 1, 2011 02:59
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jackyl posted:Personally, when I sold my first one, I went overboard making sure it was show quality, since it was competing against other houses for an offer.
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May 1, 2011 03:03
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I get your point completely, but I feel that if I am selling something, it needs to be quality. Of course, I look for the opposite when buying. Post crash (of course, based on my earlier post) my wife and I looked at probably 50 houses until we found the second house with massive observable non-structural issues that we were lookimg for. Then we proceeded to abuse the sellers on those until we got it for much lower than we should have. I am currently doing the same thing for a vacation house, actually. I am only looking for houses where it was obvious the person was scared of spending cosmetic money. And I will probably abuse that person even worse, since 25% of houses in Florida are uninhabited or something similar - I will have that stat nailed when the negotiation starts. Now, that's my wife and I. My brother in law and his wife, on the other hand, are looking in a semi high range in Louisville for their next house and want to move in and do nothing. So, builder grade carpet is a turn off for them, but less so than damaged hardwood. Don't ask me why, they are idiots when it comes to financial decisions, but that is how they roll. My point is that us and my wife's brother are two opposite sides of the spectrum and, by not fixing stuff, you will not alienate me (but you will get abused on purchase price by me since I will act like the clueless non-DIYer), but you will lose my brother in law who spends more than he should on things. That's how I look at things when I sell, which is why my advice to all my selling friends is to fix and beautify. Again, I know my experiences are anecdotal, but that philosophy has served me well.... Edit: sorry, iPad typos. let it mellow fucked around with this message at 04:09 on May 1, 2011 |
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May 1, 2011 04:06
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Lyesh posted:Loan officers lie. A lot. Ask a tax attorney or accountant about this if you want a real answer and not some lie that's calculated to get you into a mortgage. Edit: Subject to certain exceptions that he almost certainly doesn't qualify for. 10-8 fucked around with this message at 17:56 on May 1, 2011 |
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