All Forum Posts by: Allan C.

@Becca F. Have you performed an amortization analysis to see when your net earnings after depreciation starts to become positive? Given your strategy and limited exposure to cash flow markets you likely will be stuck with suspended PALs for 10+ yrs. It’s not the end of the world but it doesn’t feel optimal.

There are likely other creative options, but perhaps you can buy cash with your next purchase and then lever up after you’ve clear your PAL bank. I balance my portfolio so that I always have a slight buffer of PAL.

@Kristi K. Ice makers are not the hill you want to die on. I fix all legitimate issues in my properties, with exception to ice makers. Not sure how many doors you have, but when you get to your 5th broken ice maker you realize the math just doesn’t make sense.

And while they are convenient, the level of convenience they provide are not substantial. most tenants outside of A Class will complain about having to fill an ice tray.

@Tyler Bilinovic my opinion is to get an accountant earlier in your investment career because your savings compound. Do you know how to claim various safe harbors (de minimis, small taxpayer, etc).

A tax professional can save you thousands for each property each year, which more than pays for itself. The goal isn’t to just make the most gross income, but to maximize the net - this is where a good accountant can do wonders.

For clarity, my accountant helps me minimize how much I capitalize each year within the tax laws. If you’re not maximizing your expense deductions each year, you are paying more taxes than you need.

@Lena Harris I write in all my lease agreements that I won’t replace ice makers and take each situation case by case when it occurs.

@Bill Alpert don’t ever use your floor installer again

@Kevin L. I used to go with your approach, but over time I switched. After new acquisitions I give tenants 12 months to demonstrate my value proposition as a landlord. I treat folks with respect and I address legitimate issues promptly.

After 12 months, I bring rents to market. I could have done it day 1, but chose to build trust first. Is this needed - no. Do I lose revenue - yes. But I looking at the long game - I want valued tenants that take care of the property and minimize wasting my time. I don’t deal with BS, but I also show empathy and trust. They all get this after a few months and respond accordingly.

There are many different approaches so think through which one best fits your needs, and the tenant class that you have. This won’t work for C/D class tenants.

@Jonathan Bock 52.25% of 0 is still 0. Not sure why tax rate matters when net passive earnings is the more important figure.

I think the more appropriate question is whether people know how to differentiate net cash flow from net earnings.

@Rene Hosman I’d be extremely happy with break-even, but I’d also be satisfied with ~$15k/yr.

You're going to get a range of responses and it's not that number that should matter to you, but the background behind it. Principle pay down and appreciation are the main drivers behind my strategy, and I focus more on IRR instead of cash flow.

The market is imbalanced now so it’s tough to get cash flow anywhere. The question you should ask yourself is not just what cash flow you want today, but what do you expect 2, 5 and 10 years down the line. Until you get better clarity on those answers, you are more likely gambling instead of investing.

@Daisy Hawkins where is your LLC registered - in many states anyone can search the articles of incorporation or statement of information to find LLC members.

Aside from that, seems like you're using LLC for the wrong reasons and others have already pointed out the issues.

@Philip M. Your father needs to realize he’s not only taking a capital gains hit, but a depreciation recapture hit, which may be equally as large as cap gains. The folks here are giving you solid advice to do everything in your power to avoid taking ownership until he passes.

We get that your father is going through a lot emotionally right now, and he just needs a breather to let logic overcome his emotional response. I suggest you do whatever it takes to just take all the workload off his plate, even if you are not getting paid to manage the properties.

You need to look past the trees and see the bigger forest to get motivated to step up to protect your inheritance. Do some math and figure out what’s at stake and you’ll realize it’s likely with that effort. Your family is likely looking at a $1M+ loss if asset owner is transferred now.