All Forum Posts by: Stephen Gregory

Hey guys,

Can you apply bonus depreciation for a replacement property placed in service April 2019?

So quick background, the relinquished property was bought in 2016. We held onto it for a few years a did a like kind exchange (bought up), into a newer, larger, more expensive property. To my surprise, my CPA is telling me that I cannot apply bonus depreciation for the replacement property bought in April 2019 because my basis in the property is still the same as the relinquished property. When I told him that the values were't the same (new property double in price), he said it didn't matter and I'm stuck with depreciating the same basis as the old property. He said that's the down side with 1031...you save by deferring taxes but you can't depreciate new property!

Do you think he's right or should I find a new CPA???

Awesome guys! Thank you

Hi there! We have a couple rentals which are newly constructed single family homes. The purchase amount was $300,000 each and the land cost was about $47,000 each.

I'd love to take advantage of bonus depreciation, however, we would need to do a cost seg study in order to do that.

Does anyone know a way to get an affordable study done on SFR? I'm interested in maximizing our deductions because my wife does have the real estate professional designation. She has a high income and so do I, so we pay a lot in taxes...

QUESTION: If a seller receives the option check after the 3rd day of signing the contract (The standard promulgated TREC contact) , is the buyer's option period still in effect or is terminated? 

In Texas, the seller must receive option and earnest money within 3 days of signing the contract. So here's what happened, there was an issue with a carrier from our tile company and option and earnest money wasn't delivered to the seller until the 4th day. However, the seller DID cash the option money on the 4th day. Now the seller's agent is saying that the buyer is going to lose their earnest money because they received the money after the 3rd day, however they did cash the option money. 

What do you think? Should my buyer be able to get his earnest money back?

Thanks in Advance?

Wish I would have found this a 2-3 years ago when I bought from Clayton. Nothing negative came up then when I was doing due diligence on him.

We bought from him because he said, both on his podcast and on our phone conversation, that they completely rehab their properties with new roofs, hardie siding, windows, new hvac, plumbing, electrical, etc. Essentially making a very old, cheap house like new again. Of course, his very public reputation was the main thing and it seamed out of the other less TK providers he'd have the most o loose by not being on the up and up.

I'm a contractor so I was surprised that he could do this all for an all-in price of $40,000. He told me that it's possible because its only a 650 sq ft house and he gets great prices from his vendors because of volume.

We'll after closing.........The rehab wasn't anything they promised. They only repaired what was there and didn't replace or update anything. After getting it inspected (which they were upset about) I found out that they didn't even do the work they were getting draws for. The house even had termite damage. They got paid in full for a house that still needed serious work.

After about a year of missing rent payments, notices from the city for trash and debris in the yard, I decided to switch PM companies from oceanpoint. Oceanpoint went completely silent. No return calls or email ever. I'd reach out to clayton for help to make contact with oceanpoint and he would help me make contact only after I said I would file a complaint. He told me that I was being too unreasonable and that everything was fine. 

So I switched to another PM eventually and when they arrived to the new property they sent me pics of the condition. The previous tenant apparently ran a "dog fighting ring" in the garage and there was blood and hair and excrement everywhere in the garage. One side on the exterior was "melted" from what seams to be a fire from a BBQ. The new PM gave me quotes from contractors of $6,000 just to get it ready to rent again. This was from a combination of things not getting done originally like they said and the tenant trashing the place. The tenant was in the property for less then a year because she had to get evicted for not paying rent. Evidently, oceanpointe  placed her into the property before any of the repairs were done. So they moved her in first, sold the house to me, collected draws for work that was never done, then after I got the house inspected and busted them, they did a halfway job doing repair work.

After paying some fees from the city for trash and debris violations and paying the new PM to remove that trash and debris (and a tree limb which fell on the roof). I got in touch with clayton and after making it clear how disappointed I was he agreed to buy the property back exactly the same amount I paid for it. 

Even though I was glad he agreed to buy back the property, I wish I would have made some bad reviews sooner. Maybe I could have helped other investors not get ripped off.

Maybe he can be featured in a future episode of "American Greed"?

It seams like you either have to be a lawyer or mortgage professional to know what the language means but it was this part, "such as delayed financing" that got to me.

Non-arm's length transactions are purchase transactions in which there is a relationship or business affiliation between the seller and the buyer of the property. Fannie Mae allows non-arm’s length transactions for the purchase of existing properties unless specifically forbidden for the particular scenario, such as delayed financing. For the purchase of newly constructed properties, if the borrower has a relationship or business affiliation (any ownership interest, or employment) with the builder, developer, or seller of the property, Fannie Mae will only purchase mortgage loans secured by a principal residence. Fannie Mae will not purchase mortgage loans on newly constructed homes secured by a second home or investment property if the borrower has a relationship or business affiliation with the builder, developer, or seller of the property.

Andrew!

I love the idea of your LLC lending to you in your individual name in order to get a conventional mortgage (better terms than portfolio).

I looked into this a little bit last year and one of the potential issue I found was the language of "arms length transaction" from the borrower.

There's a good chance that I didn't understand what it meant but basically I understood that the owner (members) of the first lending LLC couldn't be the same as the borrower.?

https://www.fanniemae.com/content/guide/selling/b2...

Again, I'm not sure if I'm correct but won't the refi lender do an entity search and eventually find the name of the borrower? 

Any help you can give would be greatly appreciated!

Hi Brian,

I'm glad I stumbled across this post.

I've done about 6 BRRRR properties in the last year or so.

As you know already, for a conventional loan you need 6 months seasonal. That's not gonna work for us who want to buy multiple properties per year.

You need a porfolio loan. These small banks use their own money and hold it in their own portfolio (hence the name), so they don't need to confirm the loan to sell to secondary markets.

I've called around to about 30 banks until I found the right one. As of now the terms we are getting are: 80% LTV (APPRAISED value not purchase), 20 year am, 5 year arm (stays fixed for 5 years then adjust to prime plus 2)

There's Pros/Cons to Portfolio Money

Pros:

-LTV on Appraisal (no money left in the deal if you keep in within the 75-80 LTV)

-No seasoning

-Relationship based so they are generally easier to work with. They also understand REI and what you're trying to do.

-No limit on number of properties. You can even get a blanket loan to include several properties under one loan number.

Cons:

-Higher Interest and shorter amortization. This makes it hard to cash flow. Portfolio loans are essentially commercial loans being used for residential property so no wonder it's hard to cash flow. 

-Interest rates will likely increase.

-Cash-out refis usually have slightly higher closing cost.

-It can be hard to find a lender to does these or even knows what you're talking about.

-You will still need to fill out an application, personal financial statement, have good credit and DTI . If you don't have those than you will need to find an equity partner.

Please fill free to send me a PM if you have any questions!

It's so hard to decide on which company to use. Seams like premiums are sky high and jargon making it hard to compare apples-to-apples. Who do use and why???