All Forum Posts by: Chris Burcher

I guess I'm still not clear about those situations. 

And, yeah, my wife is an MD but the whole plan is for her to retire and for us to live off the rental income. So I should have clarified, should I still get REPS in that situation where there's no more w2 income (or very little). 

Seems like that only applies if I'm still making mucho dinero. At $100k or less, I don't think i have to worry about NIIT?

Hi,

I have been REPS the past 3 years. This year (tax year 2021) we did well because we purchased a property and did a cost segregation. The other two years I didn't see a financial benefit from doing reps. Maybe I 'did it wrong', plus we had weak CPAs in prior years but have found a great one now. We did not do meaningful cost segregations in those previous years.

I haven't asked my CPA yet, but wanted to get some perspectives form experience here about other benefits of reps beyond the tax savings via cost segregation and bonus depreciation.

I realize there might be some minor write-off capacity that is increased with REPS, but would this be meaningful?

Is it worth getting REPS for other reasons? Are there non-financial benefits? 

What am I missing? 

The life situations that my MD wife is considering 'retirement' so there would be little W2 income to shelter, plus I would probably go back to work at least part time making REPS less palatable. 

Thanks, everyone!

Chris

Absolutely. Thanks for offering.  Should I PM you here?

Thanks, Robi - I enjoy reading your posts and thanks for responding to mine.

I assume the ARV is just under a new build ARV, which could be totally wrong, but have only done a cursory sampling of rehabbed comps in the area. So I'd estimate ARV would be 160-170k. I understand the theory of refinancing, but have never made it to that R in the BRRRR but have seen refinancing terms that have higher interest rates at only around 70-75%. So If I got maybe 120k back out (not counting closing costs) I guess that's something to consider but I can't imagine a rehabbed 1910 house could compete with a new build. I am a bigger fan of forced appreciation vs. market but I haven't developed a relationship with a charlotte contractor yet. Was planning on starting on a simpler/cheaper rehab to try out a contractor before taking on a major rehab. But that process is so slow. We made four offers this week on pretty cruddy sfh in Charlotte and none of them panned out. Three were beaten with high cash offers, and one ended up being in a flood plain and the insurance drove the coc negative.

Any insight you can share would be most appreciated!

Chris

So we (my wife and I) have made a concerted effort over the past 6 months or so to invest outside our small, rural local market in Charlotte, NC - a very competitive market with low supply/high demand. We originally were focusing on 2-12 unit mfh to rehab, raise rents, and force appreciation (BRRRRish) to generate cash flow in the near term and equity long term. We built a decent team in Charlotte with two investor friendly agents, but have not seen any off market deals, only MLS. Interviewed several other agents, but were not taken seriously. We will total 5 sfh soon locally for REPS purposes and cash flow, but our local market is not likely to appreciate nor cash flow near as much as Charlotte. We have heard 'you can make money in any market' but the numbers look way better in charlotte and we would rather invest there - IF we could get properties.

We have been considering a sacrificial pivot to buy properties that won't cash flow very much (but more than break even) in the near term to capture some of the other investment benefits over 5-10 years. First we were considering older, cheaper sfh in Charlotte that wouldn't cash flow very much (1-3%) but would *likely* have good rent and price appreciation. But in doing so we realized that new build mfh and sfh could be had for comparable prices. For example, sfh in charlotte suburbs can be had for $120k plus rehab and get market rent - maybe a $40k investment out of pocket. Well, new build comparable sfh can be had for $190k or $40k in with 0 rehab. Meaning it's a wash which we choose and the argument being in favor of new build for decreased maintenance and capex 5-10 years plus being more attractive/rentable to PM and tenants.  

Of course, neither of those scenarios meets our original goal/criteria of 4-12 unit mfh, and the new build loses the forced appreciation and tax benefits. 

My question is, am I gaslighting myself into sacrificing our goals or are these reasonable short-term pivots in 'this' market of low supply and seemingly insatiable demand? The COVID horizon seems to be in view and maybe we *should* wait it out, but who can predict how long the supply/demand ratio will persist? What's more important, sticking to our guns (mfh BRRRRish) or pivoting to keep moving forward?

Thanks wise ones.

So my concern is that vacancies and related expenses might be higher. Hopefully I can find this information to help me decide. The advice I've been given is to pick a large, growing market where demand for rentals increases and demand might be greater than supply. But these markets are certainly more saturated.

@Kenneth Garrett

No city closer than 3 hours. Thank you for your input!!

@Nathan G.

Thank you, Nathan. My town is about 9,000. Nearest city over 75,000 is an hour away. Large city 3 hours. But I appreciate what you're saying about people needing rentals everywhere. And there are cheap properties available (we have purchased 4). None of the realtors I've talked to know what the relative supply/demand is. Most things appear under rented but I fear that might reflect demand. Your comments are valuable!

Hey guys, happy to be part of the BP community and thanks for reading.

My wife and I are newbie investors with 5 doors in our local market, 4 are under contract so we have little experience with how hard it will be to find renters. The one SFW has been easy over the past 5 years, but I understand that in small markets with low populations and growth, industries, jobs, etc. it will be harder to find renters. Just looking to hear your thoughts about this assumption. I ask because, in the COVID market, it is difficult to find deals (low price, high potential return) in our chosen, larger, distant market, but there are some cash flowing deals locally. Our goals are cash flow, forced appreciation/BRRRR, and tax sheltering my wife's income. I am REPS and manage our local properties.

So, anyone successful at investing in their tiny local markets? Support for/against the local, stagnant vs. larger, growing target markets? 

Thanks!

Chris