Posted by GIO on June 25, 2000 at 13:51:58:
Double negatives in grammar are not accepted and they are just WRONG. Try being less crass, you may actually enjoy life more and make money also.
Inspect the home all you want, if you are not confident in your OWN inspection then don’t put any money down and make your offer when your truly ready.
HORRIBLE rehab advice from LeGrand - Posted by HR
Posted by HR on June 21, 2000 at 07:28:54:
The intention of this post is not to bash Ron LeGrand; the intent is to critique the rehab materials he publishes. Let me also say, before I begin, that I am a huge fan of this site, because it offers a wonderful give and take of ideas and feedback. That for me, means sharing the best of times and the worst of times… and right now I’m in the worst of times. It would be easy to always publishize my successes, but that would not be honest or helpful.
I have profited from rehabs; I’ve made some good money. So, I’m not knocking rehabs. I’m also not ungrateful to LeGrand for getting me started. His rehab module, though, is GROSSLY DEFICIENT, in my opinion, in a few areas. It’s these areas I would like to highlight, and, hopefully, people can offer their own comments. Hopefully, we all will be a little wiser from the discussion.
Ok, let’s list what are, in my opinion, some GROSS DEFICIENCIES, in the LeGrand rehab method (as published in his rehab workbook and tapes).
Case in point: I’ve got a rehab under contract for 110k, we had the inspection yesterday, and the licensed engineer that did the inspection tore my house a new a-hole. It needs some new sills, some ceiling joists repaired, etc. While this won’t run me a fortune or kill my profit, it is a MAJOR drag. First, it has now shifted the tactical advantage of the negotiations from me to the buyer. Second, I now have to discount the sale or have it fixed, which would cause a temporary cash flow crunch for me. Next, I have to add this to the list of things to get done…
OK, let me admit from the start, I TAKE RESPONSIBILITY FOR THIS! It’s my corporation. It’s my business. It’s my profit. If something is wrong, it ultimately is my fault. After this slamming yesterday, I learned I must personally inspect everything myself because some of the info I was given was blatently wrong (like: everything is ok in the attic. It was a hot day, so I didn’t climb on the shed into the back attic attic access. When I did, yesterday, with the inspector, I was horrified to find old termite damage that harmed roof rafters, etc. Bottom line: it’s my biz, it’s my responsibility…)
I do fault, though, the person who taught me the process I have used for rehabs: LeGrand. His quick inspection method is sheer insanity. What was I thinking? We have older, wooden homes in New Orleans. We have termite, water, settlement damage galore. The notion of doing a quick inspection with a low ball offer is SHEER LUNACY.
See, the problem isn’t that I didn’t buy the place cheap enuf; I did. The problem is that I don’t know home construction well enuf to identify all that needed to be fixed. As a result, on the back end, when the buyer pulls in a deal killer inspector (which I have to assume may be every inspector, even though I know other inspectors would have let much of this go), I’ve got some construction problems to repair that I didn’t even know I had!!!
Anyway, we could go on and on about this. What’s a better method? Myer’s advice of pulling in a licensed inspector at the inspection period and then using that info to build the repair list. Man o man, this is twice I’ve gotten hammered by a licensed inspector, and it ain’t no fun…
LeGrand’s cost estimates are WAY off for my market. Enuf has already been written about that on the NG, so I won’t dwell on it.
He has NO Paperwork for contracts, etc for sub contractors! None. This is like diving into a pool with pirranah. The contracts at least give some psychological advantage over the subs to get them in line somewhat, and LeGrand offers no contracts. unbeliavable.
Let me critique Myer’s for a moment. Myers recommends using a multi-skilled handyman for the rehab work. BAD IDEA. First, good ones are really hard to find, and the ones I have used are good at some things and not as good at others. I’m moving more towards a model that subs out the work to specialists… roof to roofers, tile to tile guys, etc.
Anyway, I have to go meet a section 8 inspector to get a house qualified. What is that going to bring me today? I could go on and on, but this is a start. Since embarking on rehabs as a biz, I’ve had some eye opener experiences, and yesterdays was particularly unpleasant. While it may kill the deal with this buyer, it won’t kill my profit. It does kill my other plans and cash flow activities, though, and it all could have been avoided if I ran my rehab biz differently. Ultimately, the responsibility is mine, but LeGrand (and Myers) are at fault, in my opinion, for suggesting some flawed processes as well.
Just my 2 cents. Let the debates begin!
Cheers,
HR
Re: Do I have the same coarse? - Posted by Mel FL
Posted by Mel FL on June 21, 2000 at 23:05:46:
I can appreciate your opinions on this subject, and I don’t completly disagree. It is a little simplistic, but I think its suposed to be. Imagine how few people would ever do business after leaving one of Rons boot camps if he told them EVERTHING that could go wrong. He also did suggest that you be in the biz for a year plus before you take on your first rehab.
I am still somewhat of a beginner, and have never done a full-blown rehab so I won’t pretend to be an expert. But on the flips that I did my repairs were within a few thou. every time. And I was selling them to a true pro, this guy does between 40 and 60 rehabs a year! (BTW he spent about 15-20 min inspecting them.)
As far as his advice being “horrible”, agian I’m no veteran rehabber but I do have the coarse in front of me. Im looking at very detailed proposal with some serios pro investor language specifically designed to protect you and keep the contractor in line.
Again I don’t draw on my expertise but on the inspection checklist that I got in my coarse it says in very plain sight, in its own little text-box, and I quote…
“NOTICE
Estimated repair costs are material and lobor on an average 1200 square foot single story home. These costs are to be used only as a guideline. Do not close until repair costs have been verified.”
Again I am not saying that theres no basis to what your saying. But I do think that you should be carefull that when your stating FACTS they are correct.
I don’t want to be part of the bashing/counter bashing thats going on but I thought that someone should point these things out, for fairness sake.
Mel FL
Re: HORRIBLE rehab advice from LeGrand - Posted by JPiper
Posted by JPiper on June 21, 2000 at 21:25:55:
Hal:
Can?t really comment on Legrand since I haven?t read his material. My thought though was that Legrand was primarily a guy who turned houses over?.he doesn?t spend time with them. So the rehab process may well be one where his true expertise doesn?t shine. Certainly if you were looking at a house to flip to a rehabber?.15 minutes might be enough. BUT, if you?re going to do a rehab yourself, 15 minutes doesn?t cut it?.doesn?t even come close?..unless what you?re calling rehabs are houses that need paint, carpet and some new cabinets. I don?t call the latter a rehab.
I mainly deal in older houses?.meaning houses built between 50 and 100 years ago. These houses often need things like plumbing, wiring, heating/AC plus duct work, etc. They sometimes have structural issues. To think you?re going to inspect these houses in 15 minutes is a joke. One belief I?ve held for a long time is that you do one job, it opens up 10 more. And guess what?.those 10 more jobs were all hidden. Not only didn?t you see them, but now they have to be done to get that first job done.
One thing that I have no confidence in is the home inspector. I?ve seen literally 100?s of home inspectors over the years. Mainly these guys seem to uncover pretty minor stuff?.they?re generalists?.and not expert at any one thing. If you believe that these guys will improve your batting average at detecting the things that you miss?.my guess is you?ll be disappointed.
I have a guy working for me now who has something like 35 years of experience in the contractor business. This guy doesn?t miss much?.and there isn?t much he can?t fix?..at least when he?s sober! LOL. This guy in my opinion is a true expert, and VERY detail oriented. And old house experience in spades. I feel fortunate to have him?booze and all. But recently I bought a duplex?in which we both missed some important issues?.to include a rotted front porch! How do you miss a rotted front porch? Sheesh. We now have torn it off?and are rebuilding it (my second this year). But I swear when you looked at this thing it looked like it had a couple of loose boards and needed some paint. Only when we started to fool with this thing?and started tearing stuff off?.did we start to realize the extent of the rot?.because it was buried?.thus requiring it?s total replacement.
I mention this because I think it?s great to think you?re going to pick everything up?..but to me that?s a goal rather than an expectation. Most of the time I miss stuff?.and so does my ?expert?. We hope we?re close?.I hope I gave enough leeway for mistakes (generally I do, but not always).
I recall a rehab last year in which we worked on the house for a month or two?did a fairly extensive rehab. At the end of the job I hired a guy to come clear some of the drains and waste lines. It was then that we discovered that the main line was collapsed. Ouch! I?m not going to tell you the end of this story (I already had the house sold), but I bring it up to point out that this was not a problem that would be easy to detect on an inspection?.nor was it obvious during the time that we worked on the house even though we were running water.
There are risks that we run on rehabs for systems like this?.things that are quite difficult to check. That?s why the spread has to be there?and room in your financing to accommodate changes.
By the way, if I were going to hire an inspector (I don?t), I would rather hire an expert in his field to check things out. In other words, I would hire a structural engineer to check the structure, an electrician to check out the electrical systems, a plumber, etc. I think you can do this just as cheaply as a home inspector?.and get vastly improved results.
And Hal, remember something. I?m still waiting for the time when I arrive on the job and my contractor doesn?t say something like ?You want the good news or the bad news??. I think it?s part of the territory?.and I think that will be true even if you hire Bob Villa himself to take 4 hours to inspect your home. You take your best shot, make low offers that account for errors in judgment?.and then let the chips fall where they may.
Good luck with the rehab?you look like you?re doing a great job.
JPiper
I agree with Brad… - Posted by BR
Posted by BR on June 21, 2000 at 21:03:03:
and I also believe that newbies should be persuing other areas of investment. Wholesale and L/O’s make a lot more sence for inexperienced investors. LeGrand also supports this school of thought. I do admire that you publicly accept the resposibility of your actions as in your responce to Brad. You will learn ten times more from your mistakes than from your successes. There are better days to come.
Re: HORRIBLE rehab advice from LeGrand - Posted by Brad
Posted by Brad on June 21, 2000 at 14:52:11:
Glad you admitted responsibility. Because if you are the HR I have been reading about, you have done many rehabs before this one and you WEREN’T a newbie. The fact that you cut corners on your own inital inspection is totally your own doing. You had a good idea of what could happen already. I agree that LeGrand is deficient in some areas, as you have mentioned. But it seems you are holding him up as your kicking post at what is really – anger at yourself.
Still, newbies should take note at some of HR’s comments and heed the warning - rehabs are not as simple as some authors would make them seem. But if you have been to any LeGrand engagements lately, you’d know that rehabs are low low low on LeGrands list. He recommends now that new investors stay totally away from them.
Good luck, HR. As you said, if you still walk away with a profit after all is said and done, then you haven’t lost a thing.
Brad
Re: HORRIBLE rehab advice from LeGrand - Posted by eric-fl
Posted by eric-fl on June 21, 2000 at 14:14:56:
I also have some rehab experience, and have LeGrand’s stuff, and his stuff was what I cut my teeth on. I agree with most of what you are saying in principle, but allow me to raise a few counterpoints:
On point 1, the inspection process, I agree that you should take well beyond 10 minutes to inspect a property, as I would think Ron would as well - I think his point was to spend time buying houses, not inspecting them. He is right about this. When I initially became invested in REI, foreclosures was the area of concentration. I loved going to the courthouse, digging through all the dirty laundry, which I still can’t believe is so public, and doing the research, calculating discounts on liens, and figuring out how much money I was going to make. Only problem was, I wasn’t making any money, because I wasn’t doing the one thing I should have been - talking to sellers! I think Ron is saying, get the contract accepted with a contingency, THEN do a thorough inspection. No point in looking at houses if you don’t make the offers. One of my favorite Ron phrases is “You can’t steal in slow motion”.
On point 2, costs, ditto here. Ron is trying to sell something, so he’s going to make it seem glamorous. A dollar a square foot for a roof? Where? But also part of this is the economy - I’m hearing estimates of 70-80% of rehab costs are labor in my area right now. That’s a lot, and it can’t stay that way forever.
On point 4, I haven’t read Myers, but I can say this about that. As far as having ONE handyman, that might not be realistic, but having crews that work exclusively for you IS - several bigger fish in my pond do this. But you have to have the volume to keep them occupied. If you don’t, then subs are a better way to go - more cost per job, but less than a full-time employee, and much, much better than “do it yourself”.
Re: Nice Post - Posted by Stacy (AZ)
Posted by Stacy (AZ) on June 21, 2000 at 13:17:06:
Nice post, HR!
I think it’s VERY important to the new investors, and the less experienced, to hear all sides of the REI story. It’s human nature to want to post a story about a great deal here on the newsgroup, but it’s also human nature to NOT want to post about a deal that’s gone South, or that didn’t produce adequate results. I’m guilty of this, as well.
I recently posted about a house I’m dealing with that’s turned into kind of a nightmare. There was a burglary, followed the next day by the house being flooded-out. Now it turns out the thief has drained my checking account, affecting my ability to pay even my own bills. I’ll still make about 300% cash-on-cash with this house, but it isn’t a walk in the park.
I decided to post the info for two reasons. First, to VENT, but second, to show any new people that this isn’t always one big money-making party. There’s a definite roller-coaster theme in REI, especially for those of us without many years of experience. No course can teach the million variations of a deal, the street is the best teacher.
So, now that you’ve posted this information, someone new will learn from it and possibly avoid the mistakes that you made. The least they will gain will be a better understanding of what can happen in this business.
As for me, I credit LeGrand with giving me a much more agressive approach to investing. It was his material that broke me out of my rut of being too unsure and timid to make a real go of REI. However, I recognized some weaknesses in his material, just as you did. As with anything, I took what I needed, and left the rest. This is the way I approach any course material I use.
Thanks for a thought-provoking post, and good luck on your deal.
Stacy
Re: HORRIBLE rehab advice from LeGrand - Posted by Matt B
Posted by Matt B on June 21, 2000 at 12:15:07:
There are some valid comments below, but I must say that I agree with you for the most part, Hal. I got badly burned when I first started getting involved in real estate because I assumed that LeGrand’s simplistic approach would work just fine. I got involved in FAR too many deals where I messed up big time, assuming numbers would be much lower. As you mention, however, I also take responsibilty for these mistakes because I did not do enough research.
I am now taking a home inspection course to better my skills of evaluating a piece of property. Even though I don’t do rehabs, I have missed many things on the lease options that I do that have come back to bite me in the butt.
I have read and used Myer’s book as well, but found the information to still be too general. It was a good place to start and definetely better than simply relying on LeGrand’s info to try to do a deal.
I rely heavily on the training that I received from LeGrand’s material, and think that his lease option course is a fantastic piece of learning material. I would never have been able to get started actually making money if it were not for it. However, I think that in order to become successful long term, you MUST continuously educate yourself and continue to learn. There is SOOOOOOO much that is not covered in his course, (or any other single course) that you MUST keep buying learning materials, studying, reading, etc. Of course, as Ed Garcia says, the street is the best teacher, so even though you will make mistakes, you MUST get out there and try to work deals. That will teach you the most in the least amount of time. I know that you already know that, Hal, but there are plenty of people out there who need to realize it.
Re: First.of.all.let.me.say.that.I.haven’t.read.anything - Posted by Rich
Posted by Rich on June 21, 2000 at 09:56:50:
by.LeGrand.as.far.as.I.can.remember.but.I.will.comment.on.your.comments.in.order
1)If.you.don’t.know.anything.about.home.repair,.what’s
the.point.in.doing.a.detailed.inspection.yourself…
Just.look.at.it.to.make.sure.the.floor.doesn’t.cave.in
while.you’re.walking.around,make.sure.the.whole.
interior.is.not.burned.to.ashes.,no.dead.bodies.lying
in.the.hallway.that.type.of.thing…Then.make.your
offer.assuming.the.house.has.all.the.problems.typical
of.one.its.age.and.condition…Otherwise.you.will.be
spending.all.your.time.inspecting.houses…
2)Costs.vary.from.market.to.market…
3&4)If.you.think.a.contract.will.keep.a.subcontractor
in.line.,then.you.are.mistaken…They.
want.a.paycheck.for.their.work.and.that’s.it…A
paycheck.for.no.work.would.suit.them.fine.also…If.
they.do.the.job.for.you.then.pay.them…If.not.then.
don’t…Fire.the.bad.ones.and.if.you.find.a.good.one
then.keep.him…Dealing.with.them.is.sometimes.the.
most.frustrating.part.for.me…A.good.subcontractor
won’t.need.a.contract…He.will.complete.the.work.on
a.handshake…A.bad.one.won’t.honor.a.contract.anyway.
Rich
Re: HORRIBLE rehab advice from LeGrand - Posted by Andrew
Posted by Andrew on June 21, 2000 at 08:22:24:
Hi HR,
I dont want to take sides on this, in defence of LeGrand , Meyers or you.
It would just be a good thing to point out , that no matter what you buy as far as courses go, ulimately , it is OUR responsibilty to verify the actual costs as compared to the courses.
Most courses sold anywhere are at least 4-5 yrs old.
And, they cant take into consideration the locality of the purchaser. Some areas differ in labor,and materials.
As I expand my educational library , i take into consideration that maube someones material may nOt be completely usable for my area, but, if i can glean ate least one bit of info from any module, book etc, that can save or make me money, then that material has done its job.
Sorry to ramble on, just wanted to give a diferent perspective.
Sometimes we get mad at the courses, thinking that they should be all we need to do this job is read it and we will be experts , when in fact , like you pointed out, we need to let professionals do their job for us (ie , hire someone to inspect for us ) or put the appropriate contingency in that allows for a complete , further inspection to be caried out by a certified professional.
Take care.
Andrew
Re: HORRIBLE rehab advice from LeGrand - Posted by Steve
Posted by Steve on June 21, 2000 at 08:21:54:
>1) HIS INSPECTION PROCESS IS PURE FOLLY!!! LeGrand >says to spend more than 15 minutes inspecting a home >is to spend 5 minutes too much. Oh man,
Legrand does NOT teach you to go BlINDLY and make an offer based on the quickie inspection then buy the house. He TEACHES you not to waste your time on the inspection, assume it needs everything and make the offer. ONCE the offer is accepted THEN and I repeat THEN get a contractor to do a COMPLETE inspection.
IF you find a lot more repairs than you estimated, Legrand teaches you to go back and renegotiate and/or USE YOUR ESCAPE CLAUSE.
Why this technique? Because you’ll get more offers made, You’ll find out who the motivated sellers (rather than wasting two weeks on an unmotivated seller)
Go back and review the course again. You missed some KEY POINTS!!
>2) LeGrand’s cost estimates are WAY off for my >market. Enuf has already been written about that on >the NG, so I won’t dwell on it.
He admits that in the course. He tells you go revaluated the list based on your market.
>3) He has NO Paperwork for contracts, etc for sub >contractors! None. This is like diving into a pool >with pirranah. The contracts at least give some >psychological advantage over the subs to get them in >line somewhat, and LeGrand offers no contracts. >unbeliavable.
Oh come on. Be a professional. I suppose Legrand should have brought the course to your house and a silver platter too.
>4) Let me critique Myer’s for a moment. Myers >recommends using a multi-skilled handyman for the >rehab work. BAD IDEA. First, good ones are really >hard to find, and the ones I have used are good at >some things and not as good at others. I’m moving >more towards a model that subs out the work to >specialists… roof to roofers, tile to tile guys, >etc.
Wrong again… Myers is right and YES it does take time to find a good handyman that does everything but they are out there! Be patient and disciplined enuf to do it right!
>Anyway, I have to go meet a section 8 inspector to >get a house qualified. What is that going to bring me >today? I could go on and on, but this is a start. >Since embarking on rehabs as a biz, I’ve had some eye >opener experiences, and yesterdays was particularly >unpleasant. While it may kill the deal with this >buyer, it won’t kill my profit. It does kill my other >plans and cash flow activities, though, and it all >could have been avoided if I ran my rehab biz >differently. Ultimately, the responsibility is mine, >but LeGrand (and Myers) are at fault, in my opinion,
How weak! Take ALL the responsibility or go home and don’t play ball.
Be a professional and learn. The courses you have are tools!!! They are not the Bible.
Steve
Re: HORRIBLE rehab advice from LeGrand - Posted by clint
Posted by clint on June 21, 2000 at 08:20:02:
sounds like something Joe K would write. NICE
Re: HORRIBLE rehab advice from LeGrand - Posted by chris
Posted by chris on June 21, 2000 at 07:51:22:
HR-
Thanks for sharing. I have Myers’ book: Buy It, Sell It, Fix It, Profit! and I am still in the process of finishing it. Have you also purchased Myers’ course or only his book?
-Chris
Re: HORRIBLE rehab advice from LeGrand - Posted by Laure
Posted by Laure on June 21, 2000 at 22:59:02:
That’s too funny. I was video taping a rehab last summer. I had three guys there working that day, and it was really buzzing, and thought it was impressive, so I turned on my camera. Not three minutes into the tape, one of the guys came over and asked, on tape, “Laure, You want the good news, or the bad news?” LOL !!!
Your comments on rehabs is right on ! I’ve only got one porch under my belt though. Also undetectable upon inspection.
Laure F 
HORRIBLE rehab advice from LeGrand - Posted by HR
Posted by HR on June 21, 2000 at 21:51:11:
Thanks for the advice, Jim. I appreciate how long it takes to post, and I appreciate the advice.
I suspect you are indeed correct: I’ve seen some of these inspectors miss stuff that no sober human being could possibly miss. But they did. For the right fee. I’ve also seen good structural folks that can’t be bought do a good job in two hours. Those are the folks I’m going to use.
I totally agree with the idea that you can’t get 100% of it. We have the same situation here: all older housing, and one opens a wall with fear and trepidation. Good margins cover bad discoveries.
Sometime stupid stuff happens. My wife’s best friend is marrying a nice guy who has started his own pest control company. He’s started his own biz, and has typical start-up and cashflow blues, so I’ve hired him to do my termite work. He gives me good prices, and, when I inspect property, he dives under the homes for free and gives me a report on the condition. Having a termite man on your side can also be mighty helpful when you need an inspection for act of sale sometimes. Anyway, come the inspection two days ago, turns out the buyer’s termite man went under and immediately raised a red flag. There was wood touching the dirt, a big no-no. I coulden’t believe it, so I crawled under myself. Sure enuf, plain as day, were some 2X4s he had failed to remove. I coulden’t believe it.
Sure, I guess I should have inspected his work to make sure it was ok. And, truth be told, he and I were going to check it out Monday, a day before the act of sale, just to make sure things were kosher. I stopped by his house, and a homeless guy had just stolen his dewalt drill, so he never made it over to the property. Could I have gone under and checked it myself? Sure. Granted, it was probably 110 degrees under the house, and I decided not to go, but I could have. Nonetheless, this guy failed to do a basic task, and it cost me a failure on the termite certificate. And he’s a friend who does me favors, to boot.
I know you agree with this, Jim: not to be crude, but, in the end all that matters is my pleasure in the tasks and my bank account. No one cares about my pleasure or my money as much as me. If this guy, who I felt I could trust, screwed up, it’s ultimately my fault. It’s my house, my biz, my profit, and my problem. Same goes for other subs I trusted to give me an accurate read in the attic. At some point I think you need to trust enuf the people you hire, but I evidently haven’t found some of the right ones to trust.
Anyway, I’m rambling and will stop. I appreciate the advice.
Cheers,
HR
Re: HORRIBLE rehab advice from LeGrand - Posted by HR
Posted by HR on June 21, 2000 at 18:28:42:
Brad,
Thanks for the comments. You are 100% right: this is 100% my doing. It’s not my first rehab, and I may have gotten a little callous on it, and it has come back to bite me. And you hit the nail on the head exactly: the person I am most angry with is myself. I took the lazier way out, and now I am paying the piper.
Having admitted that, I suggest again, nonetheless, that LeGrand’s rehab method is flawed. I’m going to make the same point below to Andrew or Steve or whoever is really riled up below, so I won’t repeat myself here.
Cheers,
HR
Re: HORRIBLE rehab advice from LeGrand - Posted by Laure
Posted by Laure on June 21, 2000 at 23:12:12:
I just put my first full timer on the payroll. I still sub out certain items such as plumbing, wiring, HVAC. But he gets most of the grunt work done. Ripping up carpet and vinyl. Painting, ripping out kitchens and baths. Laying sub-floors. I taught him how to lay Laminate flooring and ceramic tile. We are now getting a crash course in roofing. We are on our third roof in three weeks, with two more leaking. I bring in extra guys for roofs.
But you’re right. You have to have the volume, and I haven’t until now. I think ahead, and always have two houses ready to buy to keep the guys busy. Like, when we have rain, we have somewhere to go to do inside work. I have a couple of guys who call me in the morning to see if I have any work for the day. I guess they go to the tavern if I don’t have anything ! LOL
I am on the job every day, and have been criticized for it by other investors. But hey ! I like it ! And I like the finished product, and the efficiency there is when MaMa is there to crack the whip ! LOL
My friends think it’s odd that my husband is in the office, and I am on the roof ! But I drink beer, and he has mixed drinks. Maybe I just like to break rules.
Always just a rebel.
Laure F
OH yea ! Well I got you beat ! - Posted by Laure
Posted by Laure on June 21, 2000 at 23:28:31:
in 1998, I sold a pricey piece of commercial real estate. I did a 1031 exchange into 5 pieces of single family homes. My “wonderful” CPA is finally doing my 98 taxes (another story) and he tells me that I didn’t take full advantage of the exchange and I will have to pay taxes on 65k. OOPS. Neither he, nor my very expensive Attorney warned me of this when I consulted with them on the exchange when it was taking place. I took all the cash, used escrow, met all the requirements EXCEPT I didn’t go back into debt the same amount that I was in with the commercial property. Basically, I sold the property for 250k. Paid off the bank for 81k, and bought property with the rest of the cash. I needed 16k for the last piece of property, so I brought a check to the closing. That money was from a different loan. 81 minus 16 equals 65k. And that’s what I have to pay taxes on. I didn’t keep my debt load. I was “relieved of the debt”, therefore it is taxable ! I just got this info today, and I was so peeved, I couldn’t even function for an hour. Also, I was informed that my CPA bill will be “a little more than last year… about 9,000” I was on a roof, helping with the job. I actually thougt about … throwing the hammer ! No, I didn’t think about jumping… until now ! hehehe
BTW, this wasn’t my first 1031 exchange either !
Laure F