All Forum Posts by: Ashan D

If you'll re-read my post I mentioned that forced appreciation was left out as a factor. (to compare future appreciation potential vs cash flow)

Also the tone of my post was against overly aggressive speculation but you quoted me out of context.

I have a great job that I could do while traveling/RE investing. So, ignoring factors such as forced appreciation and very good deals, if I could choose from the following portfolios of investments:

5 high cash flow properties with low future appreciation potential

5 average cash flow properties, average future appreciation potential

5 low cash flow properties, high future appreciation potential

I would probably take 3 of the average properties and 2 of the low cash flow properties. Of course in real life we want to be selective so that we get a great deal on each side, but overall I think the best avenue for investors who do not need cash flow to survive is to lean to the speculative side.

I see cash flow as the safety margin of the investment and would gladly give up a good bit of appreciation potential to have a solid buffer here for unforeseen market conditions. But by the same token the OP is right in that appreciation generates wealth, not cash flow. That is what we want to maximize, albeit without gambling.

Thanks guys. It sounds like real estate investments can not help me with my current situation. When RE takes up a significant amount of my time in the future I will try to use the "RE professional" card.

I appreciate the advice about starting a corporate structure to minimize my tax burden. The most promising structure I have read about (that doesn't sound like a scam or tax evasion) is an LLC that has me as a member as well as a C corp. Assuming my taxable income is $100k, the C corp would be a 50% owner, because the first $50k in earnings are taxed at the lowest corporate tax bracket of 15%. The rest of the earnings can be paid to me via some sort of payroll or pension. Hopefully this will reduce my taxes to a more acceptable level (20-25%?)

Thanks again for the initial guidance
AD

Guys,

I have been thinking about taxes lately and have come to realize that they will hit me very hard if I do not proactively find a solution. I trade the markets with with few expenses to deduct and will be in the 28% bracket. California tax is another 9.3%. This means that if I don't do something about 1/3 of my account is going to taxes

My initial plan was to wait a couple years and start straight by going into a good sized property, either a 15+ unit apartment or even better, a small strip center or office building.

But taxes will severely diminish this plan. I need to do something different to save my money for now.

I have less than a year of trading history so getting a residential loan will be difficult.

I live in Long Beach, CA so buying a house around here, at this time, is not a good option. I can not move for 2 years due to school.

I am considering buying a SFR for tax shelter purposes.

The closest areas that have cash flowing SFRs are about 70-100 miles away and these areas are not ideal (Lancaster has a high homeownership rate due to high average income, but also is a high crime city for some reason. Moreno valley is an outskirt area and also somewhat lower class)

DO you guys think going this route is even worth it in this climate, or should I just take the hit and pay full taxes for now?

I am wondering where I should get a conventional loan when investing outside of the local area. Would I go with a bank local to me (to perhaps start or continue a relationship) or am I basically required to use a bank close to the property?

Thanks

Interesting, I would have thought government tenants would be the best! What problems could they possibly cause?

Does anyone here deal with commercial tenant properties (office/retail/industrial) that are distressed, non-performing, or otherwise high vacancy? I think there's a lot of upside in these properties if they can be bought based on their current income stream because there is room to add tenants, thereby increasing the NOI and appreciating the building.

Any discussion on these types of properties is welcome. I'm especially curious about how to seperate the good prospects that can be changed around from the bad ones that are unfixable.

Everyone is in favor of property managers so I guess i was definitely wrong there. Maybe it is reading all the horror stories of residential property managers that has had me biased against them. Maybe thing are generally better in commercial (the tenants are a lot less maintenance intensive I would think)

Thanks, I had no idea NNN was so common.

Honestly the only one of those responsibilities that is significant is making sure the property is in good condition. I'm sure an annual inspection can cover that.

IMO reit's are an inferior investment to real estate. If I wanted to go that route (and I had a long timeframe) I might as well put my money in an index fund. I want the benefits of real estate. I know going out of state will make things harder, but I think I'll be able to work things out.

But as far as a more standard type of lease is it necessary to be around? Phrased another way, what exactly to commercial tenants see the owner of the complex for besides negotiating the lease? (because I think tenants covering repairs is standard in commercial leases, tell me if this is not right)

I want to avoid NNN for now. I'm trying to figure out if I can still avoid property management on a more standard type of lease since I won't be around the property (I live in CA and am looking out of state) FYI I am most interested in multi-tenant office buildings or shopping centers