All Forum Posts by: Paul Garcia

@Michael Ealy Great project! Nice to see actual rents beat assumptions. 

If you have not already, I would suggest analyzing the impact of your tax abatement in your decision making (sell/cash flow).

A direct cap is not typically used in the valuation of a tax abatement. You would value the property as if it had full taxes and cap that NOI and do a DCF for the anticipated saving from the tax abatement. With a tax abatement, the value of your property (ignoring property appreciation), goes down every year until the term of the abatement is over.

I do not know anything about Hamilton County, but if you think that without the abatement the NOI would be greatly reduced (upon full assessment) and the values in the area are going to go up, I would keep selling the property on the table!

Thanks!

Hi Everyone,

I'm renovating a 4-Unit in the Albany Park neighborhood of Chicago. Gut rehab of 100 year old building which will be kept for rentals. I've always installed crown molding in any rehab as that is what I was taught. As I look at the new stock in all areas of Chicago I've noticed none of the new properties has crown molding! Even the very high end new residential towers do not have them. 

Of course I will be trying to get top of the market rents, with the area only having a handful of new developments to compete with. Does anyone have any thoughts/experiences regarding this? The crown will cost about $3,000 a unit and I'm staring to question the value. 

Thanks!

Hi All. 

When it comes to real estate I consider myself a hard nosed investor. Always getting involved with the nitty gritty and just pushing through (never pretty). When renovating this results in myself acting as the general contractor. I'm currently mid-way though a renovation where I'm adding a floor to a brick building. The other day something struck me and made me question my practices. A few buildings down a property was demolished, foundation built, and 3 stories of the brick exterior finished before I was done with the one floor! 

I hire and oversee the demo guys, hvac, plumbing, electrical, drywall, paint, floors, etc. Although this helps significantly lower my costs, the added time and stress is starting to weigh on me. I have a full-time job outside of real estate. 

For my next project I'm thinking about hiring an experienced general contractor.  

What is it like hiring a big time GC for your project? 

Are you on site everyday?

Making good old Home Depot runs regularly?

Meeting and calling different tradesmen? 

Noticeable increase in costs?

Whats the GC experience vs doing it yourself?

Thanks!

Hi All,

After 30+ years of owning apartment buildings my dad finally but his properties into LLCs (sole owner/series LLCs)! He also set up a management company, he has always self-managed. The idea is for the individual properties is to hire the management company to manage and of course pay a fee. I know this is not an unusual structure but I'm trying to see if there is value here. My dad does not work anymore, like a 9-5, and the goal of this structure is to reduce his tax liability. Mind you he has owned them for a long time and the available deductions are running out. 

The problem I see is that the management fees charged will now be top line income for the management company. What kind of deductions are allowed for a management company? Could you run healthcare costs through there? Is income taken from the management company subject to FICA taxes? Trying to determine what is the best structure for the least amount of taxes.

Thanks!

Hi John. I also started investing after college. One suggestion I have for you is to learn about real estate financing. Look into the nuances of different types of funding. In my opinion, financing is something that can slow the process down. A good credit score and a down payment does not always result in easy financing. 

Best of Luck.

Hi All,

I have a question about reserve requirements on a Fannie Mae mortgage. I've been under the impression that after 4 financed properties, the requirement is 6 months of PITI(A). I'm looking at the Fannie Mae website now and I'm seeing something different. It reads 6 months of PITI on the subject property, and a percentage (2%-6%) of the outstanding mortgage balance on other financed properties. Can anyone confirm which is correct?

Thanks!

Hello All,

I think everyone can agree that investing in real estate, no matter how savvy you are, requires capital. Saving up any amount of money can present challenges, regardless of your financial position. In real estate we sacrifice the good for the great, but sometimes the temptation to settle can be tough.

What sacrifices have or do you make to invest in real estate?

So far, I have not had it rough. I started investing right after college, before life (kids, bills, etc.) have really kicked in. In my eyes, the biggest sacrifice I make is living at home (yes, in my Mom’s basement), which also requires a 3 hour commute to work. Although I can afford to move out, I choose to live at home so that I can continue to save and invest. At 24 years old I meet a lot of new people; it stinks having to answer that I live at home all the time and immediately get judged as unsuccessful or a slacker. But in the end it’s worth it!

6 months. I was fresh out of college working as a commercial real estate analyst. Since I only saw class A downtown real estate at work, that is where I aimed my search. Could not find a property in my price range that cash flowed how I wanted for 6 months (big surprise). One day I decided to give the suburbs a chance and bought my first one after a week of looking.

Thanks! I did not realize the extra steps it took. Not worth it for me given the number of applications.