All Forum Posts by: Carlos Varum Jr

Good morning,

Thanks for taking the time to read this and help me wrap my head around this.

So with the recent legislation, my understanding, is that there is a 26% federal tax credit for the purchase AND installation of Solar Panels on a residential property. 

I have several apartments where my business model has been, and will continue, to include utilities with rent... thus I pay the electricity. Some of these apartments even have heat pump/heating and cooling... so the 4 cold months of New England, I get a good sized electric bill... but evens out the rest of the year with small electric bills. That said, I am considering having panels installed on the roofs of these buildings to pay the electric for these units, and in RI we have net metering, so I guess, if there is excess, it goes back to the grid and I get credited.

So let's get to the math:

Let's say, for easy math, an array costs $50,000 installed ( I know it may be higher - again easy math).

To start, I can write off 87% of the cost of the array (my understanding is that you can write off the full cost MINUS 1/2 of the tax credit which equals 87%) which comes out to a $43,500 write off to go against net income from that LLC (which I believe is written off over several years? Or can you Bonus Depreciate Solar Panels?).

Then I get a 26% tax credit, which is equal to a $13,000 tax CREDIT for this LLC. Something very special, from my understanding, because this is a credit on my Tax Obligation. For me to write off $13,000 off of my tax obligation (different than a normal write off) and let's say I am in the 22% tax bracket, that would be comparable to $59,090 additional write off ($13,000 divided by 22%).

Is this not theoretically a $102,590 write off ($59,090 + $43,500) that is passively used to offset my tax obligations over the next several years?  a 105% return on investment?

AND I get free electricity out of it?

So, am I wrong in thinking this is not super advantageous and a no brainer?

Let me know your thoughts!

Hi Everyone,

Need some help: Where are other's marketing their Co-Living / Room Rentals? 

I use to advertise my co-living spaces (room rentals) on Trulia (which also pushed down to Hotpads) and Craigslist. 

But now Trulia removed Room Rentals - so that just leaves Hotpads and Craigslist... and I feel like I am the only one on Hotpads, and barely any leads?

Am I missing the "Hot" place where people are marketing these spaces?

Let me know,

Carlos

I would. If you think you can find something else to invest with the cashout. 

Alternatively, you could get a Line of Credit, then you only pay interest when you decide to pounce on an opportunity. 

They are charging up here in RI as well. No value add. They have removed Rooms for Rent now from Trulia, they offer NO Parking Spots for rent option... they are going the WRONG DIRECTION unless their hope was to start sending investors away from Zillow like us. I just wrote Redfin and asked their CEO and Developers to start offering Rentals on their platform. EVERYONE SHOULD WRITE REDFIN and ask for this Enhancement Request, because I am fed up with Zillow. We are already losing $1000's with vacancies or tenants behind on rent and eviction moratorium until March 2021... now Zillow wants to add salt to the wound and charge WEEKLY to publish on their site? 

The other option is BiggerPockets create its own Rental Website! :-) 

I agree with @Stephanie - stop wasting time with taking advantage of this loophole... make you payments and just refi at these ridiculous low rates while you can. I am shaving $1000/s per month refinancing all my properties. And the banks give me the best rates, why? because I make my payments on time, every month!

We just learned this as well - I think it's kind of ridiculous that they charge. The reason Zillow is #1, is because it was FREE. Otherwise there would be NO listings and it would be the LAST place people would go. 

You would think they would have learned from Craigslist. Craigslist use to be the #1 place to search for anything, but then they started to charge for certain categories... it quickly has gone downhill. Our rental listings are free, we still post there, but the number of quality leads have dropped. To be honest, the same is with Zillow - lots of leads, 1/3 reply back to you... and now I have to pay $10/week?

That said - as an Real Estate Investor, who always flips things around to search for opportunity, here's how you make $100 Million dollars off of Zillow's mistake of charging ... develop another website that offer a FREE place for landlords list their rental and FREE for tenants to search. Provide many of the bells and whistles that Zillow, or Hotpads provides, and start taking market share away from Zillow... in 2-3 years Zillow will come knocking on your door to buy you up, like they did with Trulia and Hotpads. 

Who's with me?

@Scott - Interesting point.... particularly in regards to the hedge funds. I wonder though, if they can keep up with the supply, and IF the real estate market softens, if the Real Estate Hedge Funds will start to tank and lose investors... thus slowing their investments in the Single Family market... chain reaction or perfect storm?

Financing is cheaper if you do it personally vs using an LLC. You probably save 1 point on the interest rate versus commercial lending. You can overcome the legal risk of not having an LLC with a large Umbrella Liability Insurance Policy, if you are worried about that.

I started off buying the rentals under personal name, then Quit Claimed to an LLC once I had a couple.

On Foxnews.com this morning there was an article that alerted me of a Tidal Wave of Properties that were going to start popping up on the market: https://www.foxnews.com/lifest...

Essentially, what they are alerting to is the fact that as Baby Boomers pass away, they are leaving behind their homes, vacation homes, etc..

They expect more than double the properties that came on over the past 10 years to come onto the market. 

I know a lot of Biggerpockets members see this as opportunity, but question is who is going to fill that void, both financially and physically? Is the population really going to increase by that amount to fill the void of vacancies that are going to pop onto the market over the next 10 years? I don't think so. 

So, 3 questions BiggePocket Members:

What happens to the real estate market over the next 10 years. Boom? Bust? or Stay the Same? 

Will the increase of properties on the market, bring more Millenials to home Ownership?

Does the rental market get soft as they flood to cheaper properties that make it onto the market?

And a 4th Bonus Question: How does this flood of properties change your real estate investment strategy?

Just playing devil's advocate here: for only 13K profit... wouldn't it be worth to just rent it, then do a cashout refi? 

Let's say you got  $1800/month in rent for a fixed up 3 bed in that area, you get $21,600/year in rents. Most commercial lenders will give you 80% of the value of the property if it is stabilized (locked in a yearly lease)... my guess is it will assess for $216000+/- or 10 times yearly rents... so you cashout $172800 @ 4.5% commercial lender rates, that is $875/month for a mortgage.... minus expense, you are probably bringing home $700/month in profit virtually tax free (because of depreciation and other benefits of renting properties) versus $13K of profit flipping that you have to give between 10% and 37% to the IRS for short term capital gain... let' say you are in the middle tax bracket (24% capital gain tax) so $3120 of your profit goes towards taxes, so you really only made $9880!

 If you made a $700/month profit, it only takes a little over a year to make that same flipping profit in rents, but the best part is that after that point, you are now making additional monthly profit, and the house is brand new... nothing should break! You should be making that monthly profit easily for 5 years with only minimal repairs/maintenance. So $700 x 12 months x 5 years equals $42000 in profit virtually tax free, versus the short $9880 in 10 months...

Don't get me wrong, $9880 is a profit! You should be happy, just the same way that everyone on here is happy for you, but every deal is different...  if its not worth flipping, pivot and look at what other options you have to make a better profit...