All Forum Posts by: Cody L.

Nitya overpaid for most assets, but was saved by the market.  

When you pay $130k/door for something that should be $100k/door, you overpaid.  But when the market rockets up to $150k/door, you can escape death and look like a genius. 

When I hear "near med center", I don't jump to "3rd ward". I have some nice properties near med center (my highest NOI property, on Brompton, is near med center. As are several of mine in the 'good' parts of 77004 (i.e. west of 288). Properties on Binz, Jackson, Wentworth, etc.)

THat said, I also have properties in 3rd ward (Truxillo), 5th ward (Wipprecht).  Even Montrose is one of the 'wards' depending on how strict you use the names (4th ward I think?)

Personally I'd suggest AGAINST areas like Spring Branch, Meyerland, etc.  I'd stick to midtown, montrose, museum district, etc.  

I've always looked at 'sub to' = 'subject to' = 'subject to the existing first lien debt'.  So you're buying a property 'normally'.  It's just understood by the buyer, seller, title (and title will reflect) that the first lien isn't being paid off.   So not sure where we're disagreeing. 

 I was doing "subto" before it was a catchy topic for gurus.   You don't need a membership.  It's how I did many of my first deals.   It's not complex:   Say you find a house for $200k.   The owner owes $150k.  If you buy it, he'll walk with $50k (after paying off his loan).  Instead you offer him $50k and take over his note.  

There are a lot of different ways to do it.  You could do a loan with him for $150k.  So you pay him, he pays the note.  Or you pay the note directly.  Or in some cases you may pay him less than the $50k, do a loan with him for more than $150k, and pay him on the larger amount while he pays his lower amount to the bank.

But now matter how you structure there are a few risks.  The biggest (that people talk about) is 'due on sale'.  Which means if the main lender finds out the property has been sold, they can call the loan due.

Another thing people worry about is what if you don't pay the loan?   The seller is protected there by being able to take the property back if you don't pay (they'd obviously have to keep the loan current, but it would be their house and they'd keep whatever was put down)

I'm not making a case to do it or not.  What I am making a case for is if you want to do it, you don't have to pay some goofy guru scammer.  If I could do it with zero resources available to me, anyone else can. 

Quote from @Jay Hinrichs:

Quote from @Account Closed:

Quote from @Chris Seveney:

Quote from @Account Closed:

Quote from @Cody L.:

Quote from @Taylor Nelson:

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 LOL this reads like a hostage video.   Blink twice if you need someone to help you.

(always comes from new accounts / first post)

"LOL this reads like a hostage video. Blink twice if you need someone to help you."

@Cody L.: Good one.  Lol

 I saw in the facebook group this post... #transformative #invaluable. 

Next up: How to chew gum and walk at the same time.... IF anyone has the link for that training and the discount code, let me know please.   

Next up: How to chew gum and walk at the same time.  Heheh

its just chat GT or whatever they call it. My wife used it to write an add for one of my Tesla's I am selling ( new truck is here ) and it writes a decent add I have to say.

 I just got my truck!  I love it.   But we also have a "Y" and an "S".  I think I'm going to give my "S" to my operations manager and just keep the Y and the truck. 

 LOL this reads like a hostage video.   Blink twice if you need someone to help you.

(always comes from new accounts / first post)

 I used to view it as a free loan too...  But then I thought "Are taxes going to go up or down over time?".   I'd have to think that taxes are going to keep going up.  Or at least capital gains tax (which is lower than income at the moment).  If that happens, I'd of wished I'd just paid the tax at the time of sale vs. 1031 it somewhere else.    Or even when it comes to depreciation...  There are times when a property isn't throwing off a lot of income so you don't need to depreciate it so aggressively to avoid annual tax.  Yet you can't adjust that one (well, sort of by playing with what % is land vs. property value)

Also, if I'm being honest, us in RE have such unfair tax treatment (by unfair I mean unfair advantages).   I know how much my properties really make vs. what I end up having to pay.   And I'm using 100% clean 100% honest numbers.  No funny business. 

 You have the right idea about depreciation.   Think about it this way:  Some things you spend money on, you consider them an expense, and write them off as an expense against income on the year they were bought.

But some items you depreciate over time.   And property is one of those things.   A lot more goes into it than this (i.e, calculating what % is land vs property) but if you buy a $300k house and it's deprecated over 30 years then you consider $10k of that home expense to occur every year.

But that also means that if you sell the property for $400k in 5 years, you didn't just make $100k (since your 'cost' is no longer $300k).  You made $150k since over time you've lowered your cost basis by $50k by depreciating $10k/year.

You're 100% right in it's just a temporary blessing.   All that "RE is great, you can depreciate it and not pay taxes" finally comes back when you sell.  

Well, sort of.  That's where a 1031 comes in.  If you sell the house for $400k, and buy another house for $500k, you can roll that $150k of gain into the new house...

But again, the flips side (temporary blessing) is your cost basis on that new house isn't $500k -- it's only $350k.   Which means if you sell the $500k house for $600k a year later, you didn't just make $100k, you made $250k.

You can see where this goes.   It's why I don't 1031 (after 15 years, 2000+ units, and $300m of transactions).  I'd rather just take my lumps and pay the tax as I don't think tax rates are going down anytime soon so my capital gains tax on my profits are about as good as I'm ever going to be expected to pay. 

I know plenty of people that have a $1m property that has almost no basis anymore.   They may have a $800k loan on it.  They may be offered $1.1m for the property but they can't sell.  Why?  Because after paying off the loan, they'll be left with $300k.  But the IRS considers that they've made $1.1m of taxable income.    So they could be in a spot where selling is impossible as the proceeds will be less than the taxes due.

(which is why 1031 advocates basically talk about refi-till-you-die.  Where if you do this till you die, you can leave the portfolio behind at a stepped basis)

Hopefully this didn't cause more confusion  :)

And I hope no one reading this takes this as actionable advice.  I'm just some dude figuring this stuff out on his own. 

I started with Buildium when I bought my first 8 unit, 15 years ago.

2000 units later, I still use it.  Same user/pass as all those years back...