Do not allow yourself to be bamboozled by unscrupulous property owners using bogus federal income tax returns to back up their creative bookkeeping. Insist that all annual income and expense statements be supported by federal tax returns. You need to have this information so that you can verify that what you are being told jibes with what owners are claiming on their federal income tax returns. And the only way to do this is ask property owners to complete and sign IRS Form 4506, Request for Copy or Transcript of Tax Form, so that you can order a copy of the owner's Schedule E that has been filed with the IRS. However, I have found that in most cases, owners will refuse your request on the grounds that what is on their federal income tax return "is none of your damn business." When this happens to you, do what I do: Make a really lowball offer on the property, and if it is not accepted, move on to the next deal.
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