All Forum Posts by: Al D.

@John Alward It’s been over seven months since you said that you started to make money with Renatus. Your thesis was that, to paraphrase, “you get what you put into it.” My thesis before yours was that any company that requires me to put in $20,000 before they share their knowledge with me - and also tells me that I can make money with them by bringing in other paying people - is suspect. I am a skeptic - don’t want to contribute to people becoming victims.

I am still seeing “real estate investor looking for trainee” pirate signs around different towns - no idea whether it’s Renatus.

Are you making money with Renatus by doing real estate deals that you would not do otherwise? Or are you still at the phase of bringing in other students?

Thank you.

@Eamonn McElroy The syndication purchased land, entitled, and is currently building SFRs for sale. There is no leverage - only money from partners and, as sales occur, some of that money gets put back into subsequent construction. During each of these phases, there is supposed to be annual interest paid to each partner. At the end, when all SFRs are sold, there will also be a share in the profit (I presume this would be subject to UBIT.)

So, is the burden to make it clear whether or not the 2018 “income” in this K-1 is subject to UBIT for my SDIRA on the partnership’s CPA/accountant? I can’t imagine that just the fact that the income is over $1,000 - without clearly being UBTI - is enough for my CPA to say that I must file a 990T. I mean, I get the “playing it safe” aspect, but there has got to be a way to tell whether the income is UBTI, which is the second (and indelible) part of necessity for a 990T, as I understand it.

I (my SDIRA) received a K-1 with “current year increase” of $2,749. This is for a real estate syndication. I was not expecting to be hit with UBIT until the end of this partnership, when equity is to be liquidated. For now, it’s supposed to be all interest. But my CPA says that I have to do a 990-T. Could he be correct?

Part II of 1065:

G: Shows me as a “limited partner...”

H: “Domestic partner.”

I1: "IRA"

I2: Checked as a “retirement plan.”

J: All same from beginning to ending.

L: Shows the “current year increase” of $2,749; “tax basis” is checked.

M: “No” is checked.

Part III:

1. $2,749 income.

5. $13 in interest income.

20. “A”; $13

20. “Z”; $2,736

(no other box in Part III is used.)

Supplemental information for the 1065 states:

“CLASSIFICATION OF INCOME AS PASSIVE OR NON PASSIVE AS IT APPLIES TO THE IRC SEC. 1411 NET INVESTMENT INCOME TAX MUST BE DETERMINED FOR EACH INDIVIDUAL PARTNER. PLEASE CONTACT YOUR TAX ADVISOR FOR ASSISTANCE WITH THIS CLASSIFICATION.”

Of potential additional interest may be a note in Form 568:

“LINE 20C - COLUMN D

OTHER INFORMATION

PROPORTIONATE INT. OF AGGREGATE GROSS RECEIPTS..............................$ 24,708.

TOTAL $ 24,708.”

Any professional help is appreciated.

@Michael Williams I don’t know what specific area of the city you are talking about and at what time. But I can certainly see a case for this. Some areas are hotter than others. Marketing does make a huge difference, especially if that “marketing” includes a promise of a better future for the larger neighborhood and soon, which a company rehabbing a bunch of inventory in a small area can make... as well as a potentially a lower price to the local comps in these newly-rehabbed units.

My plan was to at least keep the previous price, which was market-rate. After four months of little to no interest, the PM and I agreed to lower the price, as well as tenant qualification standards. (I imagine that some may like to tell me here that my original price was too high - not the point of this post. But: certainly not high, according to my PM, whom I asked for that assessment more than once during the vacancy, even after the first discount.) Notwithstanding that assessment, the day I asked my PM to lower the price again, was when the PM found a new tenant. I think that an argument can be made that it could have been rented a lot sooner - and for more money than in the end - had at least the garbage been removed before a prospect looked at the place. We’ll never know.

Now that I learned that my PM had allowed the garbage to remain inside for months, I have to wonder whether the whole statement about how it never stopped a new tenant before is just another one of his numerous excuses. I’d really like to know who, in this thread so far, besides the first two commenters, would agree with that specific quote of his I provided.

@Derrick Craig What is the “this” that you try to explain to some of your investors/owners that some understand? I like to learn from the best.

@Caleb Heimsoth Believe me, I’ve asked about five PMs over a span of time. Not one has said they wouldn’t take care of the place because of its address - they want my business, some are just not “excited” about why they would be yet another manager of mine in Memphis. Naturally, I’d like to make sure that the problem is really not with me/my expectations.

@Caleb Heimsoth Messick Buntyn/Orange Mound, just south of Southern Ave. But would it really matter if it were D class? We are talking about cleaning after the last tenant - not getting it “ready for a burglary” while it’s vacant.

@Caleb Heimsoth “Tolerate” is a great word, Caleb. I agree with you; I should not tolerate this type of practice from a professional service.

I just learned about this practice yesterday, immediately inquired about it, and got the quoted reply today. I am just trying to confirm that my expectations are not unreasonable, specific to C class in Memphis - there is always a chance I could be wrong in my expectations.

In C class properties in Memphis, do you/your local PM clean the vacant property after the previous tenant moves out - before you ever show it to a prospective tenant? Or do you show it to prospective tenants before you clean it (with used furniture, garbage bags, smells, and overall suggestion that the landlord may not give a damn about the upkeep by any tenant?) (“Neglect begets neglect” is my concern here, never mind the property sitting vacant for longer.)

I just learned that my local PM does the latter. I saw the video from yesterday. To be clear: I was not surprised about the state of the property - only that it had been on the rental market for over 4 months (!) in the condition the previous tenant left it in. I could understand a week - if there was high demand to view the property as soon as it became vacant. Was not the case here.

And, after bringing up my (above) concerns to my PM, he explained that in his years of local experience, this practice has “...never stoped people from renting the properties, they all rented in the same amount of time based on the criteria each tenant/landlord was looking for.”

My previous PM there cleaned before potential tenants would see the property. Any thoughts on my concern from the local-knowledge people? (I also own in a few other markets - no such practice there.)

Thank you.

- Mirror, mirror on the wall, who is the best of them all? - Why, for me it’s been Derrick Craig

I am surprised to be reading that $200/door is difficult to get in the Cleveland area. I don’t know how you guys calculate your monthly returns per door (Like, do you just account for PITI, or also add expected depreciation, etc? Do you subtract expected capex? Is there a standard that each of you knows for a fact that all others are adhering to when discussing the dollar figure with the others here?) To me, in any case, the dollar figure is ambiguous because it will vary by the purchase price, downpayment, interest rate, local tax variances between towns/counties, etc. In my own experience of buying in a Cleveland suburb with 8+ school ratings (not a D class neighborhood) back in 2016, I got more than $200 per door - after accounting for PITI, before any capex, and self-managing. But I don’t calculate my potential profit that way to begin with. Instead, I aim for a 1%+ monthly return. So, for an easy example: a $100,000 purchase should gross me $1,000 or more in monthly rent. A couple of people above referred to “The 1% Rule” already. I haven’t looked at buying anything in the Cleveland area since last summer - and actually ended up getting better deals elsewhere then. But I do believe that good deals can still be had today. In fact, looking at an email I received from a turnkey provider (who does not appear to have any presence on this site) there back in March of this year, she was selling SFRs in Parma, Parma Heights, Cleveland (44102), South Euclid, and University Heights at the time. The prices for these ranged from $85,000 to just under $127,000 (and these are just asking prices.) Her pro-forma showed “estimated gross monthly cash flow conventional financing” ranging from $271/mo to $344/mo on these properties - after accounting for 3% for vacancy, 3% for maintenance, and 8% for management. While I am too tired to figure out what interest rate she was assuming and what downpayment (she did not list these metrics,) all these properties are right around the 1% rule. Having dealt with “turnkey” providers in other markets (I have no experience with any of those in the Cleveland area,) I’ve learned to find my own agents, who do nothing but represent buyers and sellers. You tell them what kind of schools you want, price/rent ratio, etc. They work for you. Just don’t forget to buy something from them at some point - only way they make money, not on managing your rentals. I found my own agent in the area, while doing my own research on Zillow. She has a narrow specialty in a narrow geographic area of the Cleveland suburbs. And I am ok with her “limitations.” I quickly learned to trust her. Back in 2016, my first property there, a duplex, was yielding 1.2% right off the bat. To put it into dollars: when accounting for my PITI (and nothing else,) I was pocketing just over $300/mo per door of that duplex. But I also knew (when I bought) that the rent had not been increased in a long time. By now, I get $487.50/door - a 1.575% monthly return. Again, I self-manage. This was not a turnkey, but an estate sale, the sellers of which quietly let a few people know they were willing to let it go for quite less than the asking price on the MLS at that time, after not an offer in months. My agent happened to be in the know. Not long after this purchase, I bought another, much newer, duplex in the same suburb, after it had been sitting on the market for close to a year. I was getting about $650/door, after accounting only for PITI. I am making $687.50/door two years later. Though, if either of the current tenants moves out, I may go back down to the original return (this property is at the upper level of the market, and new builds are still coming on.) Both of these properties were bought with 25% down, 30yr conforming. Figure out what you want (city, type of property, approximate purchase price, price/rent ratio, age, level of acceptable deferred maintenance, etc.) and tell the agent(s). There is a chance that you may get an agent who will throw everything under the sun at you as a “great deal.” Assuming that your research on the area is right, keep to your “musts,” which will also let the agent know that you are a serious investor whose time they should no longer be wasting until they really have a great deal. Keep in mind that Ohio property taxes vary widely from town to town, and some are just nuts, so choosing the city(ies) in the area should be your first step.