All Forum Posts by: Benjamin Riehle

@Frank Campos thank you! if you have any questions, please let me know 

@Brian Mitchell happy to provide value. thank you for reading. 

My Journey from Sweeping Floors to Flying in a Private Jet

Act as if… Act as if you have been there before. Act as if you belong in the room. Act as if you already accomplished the goals laid out in front of you. I am not sure when I fully embraced this mentality as a guiding principle in my life, but I know it came at a young age, and am confident it is the result of attempting to emulate my father, a 28-year career military officer. Regardless of the situation, he was able to portray a level of confidence that would reassure those around him that he had the situation under control.
The ‘Act as if’ mentality is what triggered me to drive onto a new-build construction site at 16 years old looking for a job. I was convinced I would become a real estate investor and figured a job in construction would be a great place to start. As I got out of my truck and asked for the person in charge, a worker pointed me to the trailer at the end of the cul-de-sac. I confidently walked over to the trailer and knocked on the door. The idea that I had no business being there never occurred to me. It never even crossed my mind that I had no construction background and there was no way I would get hired. It was a mixture of ‘acting as if I belonged’ and young dumb arrogance which allowed me to confidently yell through the door “My name is Ben Riehle and I am looking for a job.” when a shout from the other side asked, “Who is it and what do you want?”
When the 60-year-old general contractor opened the door and found a 16-year-old kid, he wasn’t sure how to respond. Was this some kind of joke? I remember him asking, “Who put you up to this?” and at the time not realizing what he meant. I simply responded, “I am looking to get into real estate and stopped to see if you had any jobs available.” It was about then he realized I was serious. He told me that there was nothing available and he appreciated me stopping by.

Fast-forward 13 years to this past week, I was picked up in a private plane and flown to California to meet with a very wealthy family to discuss a real estate investment opportunity. As I spent time reflecting on the actions and activities that led me to that meeting, I realized “Acting as if” played a significant role. Looking back over the past 13 years, “Acting as if” has played a major role in my journey.
However, “Acting as if” is two-sided. Everyone talks about how you have to show up and act like you have been there before. They talk about how you have to act as though everything is under control, even when you have no idea how you are going to accomplish your goals. What is often overlooked and seldom discussed is that you must also act as if you are not too good to be there. You have to act as if no task is beneath you. My father lived this principal, and I witnessed it regularly growing up.
I didn’t leave the construction site 13 years ago after I was told that there were no jobs available. After the door was slammed in my face, I knocked again. I told the contractor I would sweep floors and pick up trash for free. I acted as if I was not owed a thing. As a result of “Acting as if” I was given a chance. I showed up every day (seven days a week) that summer ecstatic to sweep the floors. I acted as if taking out the trash was exactly what I should be doing and when opportunity presented itself I acted as if I could handle more responsibility. Once I was promoted from floor-sweeper to assistant, I acted as if I was the best assistant on the planet. When you act as if, and remove the ego, you become exposed to opportunities beyond your wildest dreams.
Let me be clear, my role in the trip to California was very minor. I flew out in a private jet and came home on a commercial flight. I was grateful to be in the room and acted as if I had worked my *** off the past 13 years to put myself in a position to get there. At the same time acted as if I was not owed a thing, and plan to work even harder the next 13 years to earn a real seat at the table.
It is extremely easy to “Act as if” when you are jumping on the private jet. The question is, are you still willing to continue with the same intensity and passion when you are asked to sweep the floors?
Stay purposeful and Act as if, you never know where you will end up.

Best,
Benjamin A. Riehle.

What’s up BP! My team is finishing a project in Tucson for another out of state investor. Leave a comment with your questions or thoughts. I am passionate about helping others learn how to build wealth through real estate, let me know if there is anything I can do to help you on your real estate journey.

Now onto the project! We were able to pick this project up off the MLS, Tucson is a competitive market, being able to act quickly and efficiently is the difference between doing the deal and missing out on the opportunity. Shortly after this deal hit the MLS we had a cash offer that was quickly accepted. We then assigned the property to an out of state investor that we have worked with before. (if you would like to learn more about how we find, and track off-market deals check out https://www.biggerpockets.com/forums/311/topics/556219-flip-in-the-historical-district-of-downtown-tucson )

Once under contract, our construction team put together a comprehensive estimate for the remodel and our investment team began running a financial analysis and a market CMA. The net to the investor is after the wholesaling fee, project management fee and real estate closing costs. The investor's initial plan was to flip this property, however, because of the changing area he was also interested in a BRRRR model and holding as a rental. We began marketing the property as a fully renovated rental once the foundation for the new addition was poured. Our management team was able to get the property leased for August while the home is still being built! The project should be complete in July, at which time the investor will perform a cashout refi leave just over $25,000 invested in this project. He will have strong rental cashflow and substantial equity gain from the forced appreciation as well as neighborhood growth and increased demand. I will update the post with pictures of the finished project.

 Project Break Down:
1.Before: 2 beds 1 bath house
2. After: 5 beds 3 baths house 
3. Added 1200sqft
4. Highly appreciating area
5. Large Patio for Entertaining
6. Large living room
7. Rent for $2,300mo

There is a substantial amount of growth going on in Tucson right now, causing rapid appreciation. Culinary Dropout and Orange Theory Fitness are opening right down the street from this project. Along with the expansion of Grant Road, we predict that homes in this area are going to increase in value, rapidly.

Financials:

The investor is using a BRRRR investment strategies and will be able to pull out most of the cash from this project. He will have about $30,670 of equity built up, which will increase with the change in the area.  

 
If you have questions on the financials or would like more detail, please leave a comment below.

Happy to discuss in more detail.

Pictures below:

By: Ben Riehle, CEO/Co-Founder Apex Real Estate Network

There is a program in the recently passed tax reform act that allows investors to defer capital gains (and possibly completely remove) when gains are reinvested into low-income communities.

(Opportunity Zones: A Hidden Gem for Capital Gain Deferral) – First off, I am not a CPA or Tax Attorney. While I do have an accounting degree and J.D. specializing in Tax Law, I went the route of real estate practitioner. Please use this article as a starting point to perform your own research. I strongly recommend speaking with a tax professional that is familiar with your specific situation.

The Tax Cuts and Jobs Act of 2017 has a relatively unnoticed, yet extremely beneficial clause that can provide a substantial tax deferral opportunity to investors with capital gains from the sale of real estate, stocks or other assets. There are ample articles that examine and explain the details of the tax code; below is a general overview and link to articles that I found helpful in understanding how the Opportunity Zone Program works

In the simplest terms, if the capital gains produced from an investment are reinvested in designated “Opportunity Zones” through a designated “Opportunity Fund” the capital gains that an investor would be required to recognize as income are deferred. The deferral of the capital gains must be recognized when the investment in the opportunity fund is sold or on 12/31/2026. There is the potential that Congress will extend this recognition date, which under the current program could result in the invested capital gains becoming tax-free.

I know you have about 1,000 questions right now. Is this too good to be true? What is the catch? Am I going to go to jail for tax evasion? If you want to dig into the weeds and get clarity on the details of this program check out:

10,000-foot view to see how this all work

Policy Intent: The federal government is aiming to incentivize investment in impoverished communities. Each state will be able to designate census tracts that are “low-income” and in need of capital investment as “Opportunity Zones”. The theory is that by providing a substantial tax deferral mechanism to investors, areas that would otherwise never receive major capital infusion will receive capital investments which will improve the communities. Please note, there are counter arguments about the effect of this policy and the gentrification that could potentially result. I will leave these challenges to the legal scholars and policymakers.

Opportunity Zone: “A ‘qualified opportunity zone’ is any population census tract that is a ‘‘low-income community’’ (qualified census tract) that is timely nominated as an Opportunity Zone by the governor of a state” The governor of each state is able to select up to 25% of all qualifying “low-income communities” in his or her state. It is important to note that the governor of each state had until March 31st 2018 to identify Opportunity Zones or potentially lose the ability to do so.

Opportunity Fund: “An Opportunity Fund is an investment vehicle, organized as a corporation or partnership that specializes in aggregating private investments and deploying that capital in an Opportunity Zone

• Investors may reinvest capital gains from existing investments into an Opportunity Fund and defer/reduce capital gains taxes
• If held, the original investment’s tax basis increases by 10% after five years and by 15% after seven years
• After 10 years, investors permanently eliminate capital gains tax on the post-acquisition gains”[2]

The Opportunity Fund must invest 90% of the Fund’s capital in Opportunity Zones. There are numerous requirements for becoming and staying in compliance as an Opportunity Fund that are outside the scope of this article.

How to Invest: Unlike a 1031 Exchange, the investment in an Opportunity Fund only requires the investment of capital gains, not the entire investment (basis) plus gains. Additionally, you are not required to use a third party trustee to handle the proceeds from the sale of the investment prior to deploying in the new investment (like you do with a 1031 Exchange). The tax code requires that the investment in the opportunity fund occurs within 180 days of the disposition of the asset that triggered the capital gain. With opportunity funds being such a new concept there are still numerous clarifying questions still to be answered in terms of investment opportunities available and how the process will work (CONSULT TAX PROFESSIONAL!).

A Look at The Number: Virtua Partners put together a fantastic breakdown of the numbers comparing a traditional investment where the capital gains are recognized and paid vs. investment in an Opportunity Fund. See their example here:

In Conclusion: This program is still very new and there is much uncertainty regarding all aspects of the capital gains deferment. It appears that at least a majority of the deferred capital gains may be recognized at some point in the investment life (there is a 5 and 7 investment holding period benefit that reduces the capital gains 10-15%). Currently, it appears that the invested capital gains will be recognized but deferred at least until 12/31/2026 and all future gains made while invested in the Opportunity Fund will be untaxed if the investment is held at least 10 years. A major concern is the requirement of “phantom income” being required to be recognized on the invested capital gains on 12/31/2026. This means if you invest in an Opportunity Fund and are still invested on 12/31/2026 the current requirement is the invested capital gains be recognized at that time. However, if Congress extends the recognition requirement it is possible that all invested capital gains may ultimately become untaxed.

By now you probably have more questions than answers; for that, I apologize. At this point, it is most important to know that there is a provision in the tax code to defer capital gain income. Obviously, this strategy will not be right for everyone, but knowing this option exists may just save you thousands of tax dollars.

If you found this article valuable I would greatly appreciate you sharing!
Happy Investing!

https://www.squirepattonboggs.com/~/media/files/in...
http://virtuapartners.com/opportunity-zone

§1400Z–2. Special rules for capital gains invested in opportunity zones
https://www.squirepattonboggs.com/~/media/files/in...

Thank you, everyone, for the responses. I appreciate the support and feedback. I love that Tucson is starting to come into the national light, being an investor here for 10 years.

@Sandeep Yarlagadda I am going to send you a DM.

Thank you for your comments. 

@Thomas S.: They are tight numbers, but also conservative. Working in a historical district can be challenging, but very rewarding. 

What’s up BP! My team recently started a flip in the historical district of downtown Tucson for an out of state investment group. I am going to do periodic status updates on this project and would love to hear from you. Leave a comment with your questions or thoughts. I am passionate about helping others learn how to build wealth through real estate, let me know if there is anything I can do to help you on your real estate journey. Now on to the project!

This was an off-market property that a birddog on my team identified as distressed. Within a week of making contact with the owner we were under contract. We then assigned the property to an out of state investment group that we have a close relationship with (If interested I can go into more detail on how our system of tracking off market deals works but we basically have guys driving for dollars and identify distressed properties. From there the addresses are added into a CRM program and our caller reaches out to the owner via telephone, Facebook messenger, or mailers. We have teams driving for dollars every day in Tucson and Kansas City.)

Once under contract our construction arm put together a comprehensive estimate for the remodel and our investment team began running a financial analysis and a market CMA. The numbers presented below are conservative and the net to the investment group after the wholesaling fee, project management fee and real estate closing costs. We believe the projections to be conservative and on the low end of what is possible on this project.

One challenge on this deal is that the property is located in an area overseen by the Tucson historical society (THS). This historical committee must approve the key component of the remodel. As a result we increased our remodel budget and timeline to account for possible unknowns. We have experience with the THS, most recently on a 5-Plex that we are renovating a block away from this property. (Word of advice for anyone doing a project in a historic area, make sure you consult with experts who understand what is necessary and possible with the historic committee. On our first project we had multiple road blocks that costs of upwards of $10,000.)

Project Breakdown:

1. Currently a 2 bed 2 bath house

2. Remodeled into a 3 beds 3 bath house 

3. The previous owner started work but was unable to complete4.

4. Demo phase has been completed 

5. Once completed the home will be 1,401 SQFt

Financial Projections: 

If you have questions on the financials or would like more detail please leave a comment below. Happy to discuss in more detail.

Pictures Below:

Please let me know your thoughts on this one. Leave a comment below and stay engaged as we move forward with this renovation.

@Frank Campos, absolutely, would love to help you any way I can!

@Naftali Tolibas thank you! I think it is going to be a fun couple years!

@Robert Herrera Can hit the 1% but it is rare. To do it you have to have targeted areas where you know the rents can get pushed up through capital improvements. Doing one right now that I purchased for $90,000, putting in $55,000 and have leased once completed for $1,500 per month. ARV on it is $220,000 so have to be able to come in cash and move quick to get them.