Skip to content
×
Try PRO Free Today!
BiggerPockets Pro offers you a comprehensive suite of tools and resources
Market and Deal Finder Tools
Deal Analysis Calculators
Property Management Software
Exclusive discounts to Home Depot, RentRedi, and more
$0
7 days free
$828/yr or $69/mo when billed monthly.
$390/yr or $32.5/mo when billed annually.
7 days free. Cancel anytime.
Already a Pro Member? Sign in here
Pick markets, find deals, analyze and manage properties. Try BiggerPockets PRO.
x
All Forum Categories
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

All Forum Posts by: Brian Davis

Brian Davis has started 26 posts and replied 78 times.

Post: Solar on 1 to 4 Unit Rental Properties

Brian DavisPosted
  • Flipper / Wholesaler
  • Farmington, CT
  • Posts 189
  • Votes 89

Yes, But they say the credit may be taken under section 48. Its a difference of where the tax credit is taken from what I can understand.  See this link with accountants discussing it on intuit:  https://ttlc.intuit.com/commun...

Post: Solar on 1 to 4 Unit Rental Properties

Brian DavisPosted
  • Flipper / Wholesaler
  • Farmington, CT
  • Posts 189
  • Votes 89
Quote from @Jake Hilden:

Hi Brian,

For the most part, you will find many varying responses to this question because everyone has a different opinion on solar. But, to see how much and if this would make sense for you, it would depend on many varying factors. How much electricity is used in each home? What is the roof orientation like for each one? Are they unobstructed by shade?  Do you have long-term tenants where you would have a good idea of average kWh consumption year after year? 

With that being said, CT has great rates with their RES program that started in 2022 which makes it a pretty great state for solar, being each home is set up correctly for it. I talk to mainly owner-occupied homeowners and solar makes sense for many but not all. The investment side of things would be a bit different and you would want to make sure the numbers work for your circumstance.

I'm also a bit biased because I truly believe in solar and the benefits of it beyond just the numbers.

In regards to the tax credit, be sure to speak with a professional on that because you have to live in the property (for at least a portion of the year) to be eligible for the credit. But, I am not in a position to give advice on that. Just make sure you get the correct advice on that.


 


 Jake, you are the first person I have heard say that the property needs to be owner occupied to receive the tax credit.  I don't believe that is the case after talking to everyone that I have. Where did you find this guidance?

A side note here also, if you have a company that owns the panels and leases them to the properties, that business can depreciate the panels, even if the property were sold because that company can still retain ownership in the panels.  Those panels are a depreciable asset within the business. So in that case, in 2022, you would get to take up to an 87% depreciation on the cost of the system in year 1 and it would be fully depreciated by year 5. 

Post: Solar on 1 to 4 Unit Rental Properties

Brian DavisPosted
  • Flipper / Wholesaler
  • Farmington, CT
  • Posts 189
  • Votes 89
Quote from @Chris Seveney:

@Brian Davis

Unless you are in a location that has great srec credits, the IRR is not that great.

The feed in tariff is $0.29 in CT

Post: Solar on 1 to 4 Unit Rental Properties

Brian DavisPosted
  • Flipper / Wholesaler
  • Farmington, CT
  • Posts 189
  • Votes 89

I have recently been seriously considering adding solar to all of our rental properties. I was planning on either setting up a company to lease the panels back to my properties or to simply have the LLC finance the panels through a loan using a UCC-1 filing.

There is currently a 26% tax credit in year 1 along with the ability to use bonus depreciation on the system of 87% (with a 5 year life). Either the company leasing the panels to my rentals or my rentals could take these tax benefits. 

I am posting here to see if anyone has done this or has any knowledge of this.  If so, please share.

Post: Adding Solar to a Buy and Hold

Brian DavisPosted
  • Flipper / Wholesaler
  • Farmington, CT
  • Posts 189
  • Votes 89

What do people not qualify for?  The financing to purchase the solar panels?  Or some government program to get the panels at no cost?

I am talking about getting a loan from a place like Mosaic or PACE and buying the panels. Then a UCC lien is placed on the panels but you can refi around them if needed in the future. The loan you take out is low interest and the solar from the panels pays the loan. Then, you essentially breakeven because the money from selling the solar back to the grid pays for the panels. 

I am interested in getting these loans to put solar in, taking the tax credit and deductions up front, and then paying back the loan over a 20 year period. But I would be taking a huge tax benefit up front and making these properties much more attractive from an ROI perspective when modeling for that expected benefit.

I posted here because it all sounds fine and dandy if that's how it all works, but I would imagine there must be more nuance to it that I am not taking into consideration. 

Anyone with some background in this?

Post: Adding Solar to a Buy and Hold

Brian DavisPosted
  • Flipper / Wholesaler
  • Farmington, CT
  • Posts 189
  • Votes 89

I am told that there is a 26% tax credit with a new solar project along with the ability to depreciate 87% of the cost of the system in the 1st year. Is anyone out there doing this?  

Post: What will be the impact of the Coronavirus crisis on real estate?

Brian DavisPosted
  • Flipper / Wholesaler
  • Farmington, CT
  • Posts 189
  • Votes 89

Any thoughts on what this cut to the federal interest rate means?  We have roughly 25 homes in the process of being flipped and I was getting a bit nervous. Seems to me this should help tremendously on reselling these properties but that's just my guess.  It wouldnt surprise me if the economy still goes down the drain though.  Would be interested to see if someone has strong feelings either way.  

Post: Purchase Contingent On Finding an Investor (Buyer)

Brian DavisPosted
  • Flipper / Wholesaler
  • Farmington, CT
  • Posts 189
  • Votes 89

I was just wondering if it is possible to make an offer contingent on finding an investor ("partner") for a property. Say I have an off market seller and I propose to buy the house at x dollars only if I can find a partner (buyer) for the property within x days. Also add some verbiage about using the MLS to locate that investor (buyer). Are there any legal issues with a strategy like this? Any reason this can not be a contingency within a contract?

Post: Zillow to start buying Homes

Brian DavisPosted
  • Flipper / Wholesaler
  • Farmington, CT
  • Posts 189
  • Votes 89

How can these institutional flippers make it at the prices they are paying?  They have a gross margin of 5% while most of the guys who know what they are doing are at 40%+.   Here are their numbers and a link to the article. I dont understand how these companies can survive. It seems like smoke and mirrors.

https://wolfstreet.com/2019/05/10/house-flipper-zillow-lost-109k-35-per-flip-net-loss-triples-shares-soar/

  • Sold 414 homes.
  • Sales proceeds added $128.5 million to revenues, for an average selling price of $310,400 per home.
  • The purchase cost of these homes added $122.4 million to cost of sales, for an average purchase price of $295,700 per home.
  • This amounts to an average gross profit (selling price minus purchase cost) of a meager $14,700, or 4.9% per flip.

Post: Restructuring of Finance

Brian DavisPosted
  • Flipper / Wholesaler
  • Farmington, CT
  • Posts 189
  • Votes 89

I currently have a partner in a private equity firm. They lend 100% of the necessary costs for a flip from start to finish. I have been working with them for a few years now and we have completed roughly 100 homes together over that period of time.

As I look at the terms and costs associated with their money, it is very clear that I have a bad deal. I was hoping that through a large increase in volume that I would be able to deal with the inflated cost of money, but it is really starting to weigh heavy on me especially when we might have a slow month or when a property is marginal.   In the past, we would still do well even on marginal deals, but with the points I agreed to pay (considered a preferred return in the private equity world), it turns ok deals into something I shouldn't even waste my time with. It turns great deals into good deals, and good deals into so-so deals.

Also, by paying more points and being forced to take the entire amount of money up front, I pay interest on all the money for the entire project. It is not prorated by the day like a traditional equity line. 

A few days ago I saw the numbers come through for 2 deals that we just completed and realized I need to change direction immediately.  I have a very good relationship with a hard money lender that I have done maybe 30-40 houses with in the past and he is willing to lend me most of the money I would need but there is still the need for operating capital and a need to have money for repairs until they are released on a  draw from the hard money guy. 

I am wondering what the best solution would be for this. If someone has any suggestions. I was thinking to find some private investors that might be willing to provide smaller lines of credit that could possibly be placed in 2nd position against the property but I know the hard money lender frowns on 2nd mortgages.

I know that raising private money could work but we have 2M working at any given time and it could be very difficult for me to find that much in short order.  The business is running and we are constantly buying homes, so I need a cost effective solution that we can move to immediately. 

Any advice would be very welcome. Thanks!