All Forum Posts by: Adam Byrne

Thanks, Nels! I sent you an invitation to connect.

Hi BP!

I know conventional wisdom is that the West Coast is not friendly for cash flowing investments. I'm about to 1031 and am looking to buy and hold for the greatest yield. Can anyone recommend sub-markets in OR or other plays I might consider?

Thanks,

Adam

Hi BP!

I'm trying to get ahead of the curve before selling my commercial property in Los Angeles. I'm looking into identifying my uplegs and find an optimal strategy to maximize my cash investments while satisfying my debt obligations required by the equal or greater rule.

This search led me to zero coupon DST options.

The upside of zero coupons looks like an easy way to buy highly leveraged properties (more highly leveraged than I could qualify by myself) leaving me more cash to invest.

The downsides are zero cash flow (which I totally accept.) While DSTs are required by law to distribute lease payments, these products are so highly leveraged, the debt service by the Trustee wipes out any profit. The investor sees a yield from the equity position increasing as the principal of the loan is paid off. A related downside I just learned is that while you don't receive any cash flow, you receive a tax liability because the cash flow that would have been distributed to the investor is used to pay down the loan principal.

The more I learn about these products, it reinforces a no free lunch rule of the universe.

I'd love to satisfy my debt obligation, take no cash return, have no tax liability and am willing to trade yield over time. Are there any zero coupon products out there that function differently?

Thanks!

Adam

Hi BP Community,

I'm new to the Bigger Pockets community and grateful to learn from all of you.

I am planning on 1031ing my first mixed use commercial building in Los Angeles that I've managed for a few years. The CAP rate on our appreciated equity is very low, given our PITI. I've run the numbers and think we can conservatively double or possibly triple our CoC return out of state.

Since I have to replace the debt from my mortgage in order have a successful exchange, I'm looking at putting some of our cash from the sale into DSTs (Delaware Statutory Trusts) that are leveraged, fractional interest products. I'd be buying equity along with a proportionate amount of debt. One upside of the DST structure is that the acquired debt is the responsibility of the trustee of the DST, not me. These DSTs cash flow at projected rates depending on the asset class and debt load. The more money I place in highly leveraged DSTs, the lower the rate of cash flow. The highest leveraged DSTs return no cash but allow you to acquire lots of debt without becoming a Guarantor.

This is how I plan to free up cash in the exchange to invest in higher CAP rate areas out of California. With this exchange I'm looking to generate passive cash flow so I can pivot into real estate full time. Since I'll be paying cash for properties in the exchange, I'll have a decent amount of equity I can pull out for future investing. I'm looking to start investing in a deliberate, conservative way and look to build passive cash flow, rather than large chunks of money at a time while keeping my debts lower if possible.

Question for the community:

I've seen lots of different plays: Wholesaling, Fix & Flip, Buy & Hold, BRRRR, etc. What kind of play is recommended for someone who has owned and managed, but is new to the world of portfolio building? Secondly, what markets should I be looking in to begin networking?

I really appreciate your feedback and hope I can contribute to the community as well!

Adam

Hi there Andrew,

I too have had visions of container home projects. It's exciting to think you can retrofit a container and quickly build up a modular living system for a family or a an entire community as you envision.

My recommendation is to start small. Buy one lot and place one container on it. Do your due diligence and select the right lot. Make sure you're clear with the county or city's building and planning department. Build it out, market it and acquire a tenant. Prove the model works and it's profitable.

Then it will be easier to attract more capital to invest in a scaled up version of your vision.