All Forum Posts by: Dan Tutolo

One other thing I thought of is you can exchange into an SFH you potentially would want to live in, rent it out for a year or two and then move in and convert it to a primary residence, thus waiving the back taxes owed on it. At least that is a common strategy used by real estate investors using 1031 exchange for tax avoidance. Of course you would want to run that by your CPA. I have used ipx1031.com for exchanges in the past and found them to be amazing.

Hi Tracy, you mentioned Cleveland as an option. I actually live in Cleveland and here in the $800-1.2Mil you are into 12 unit apartment buildings. I have 32-unit and 18-unit complexes in my portfolio so I have a team in place that can handle buildings like this. It would be a great opportunity for our vault yourself into the investor realm. 

But, at the same time, there are so many things to consider if you are going to pick up a 12 unit building like how much of the utilities the owner pays (and in winter heat and hot water will take a bite out of your net), that the owner is responsible for all common areas (lawns, snow removal, pest control, common area cleaning, etc), and the amount of involvement required by you (approving applicants, approving charges over a certain amount and actively researching ways to keep those costs down, etc). 

Not to mention the amazing amount of due diligence and number crunching required in order to analyze each property quickly so that you are ready to pounce on a good opportunity when it comes up. And you need to have a trusted contractor visit each property you are looking at in order to come up with a good estimate of initial repairs so you can factor that into your offer and that doesn’t happen for free. And you have to have your financing ready to go. 

What I am getting at is if you want to pick up a 12 unit building at a good price and minimize risk, in any market, it will require a tremendous amount of research in coordination with a good team like many of us posting here know how to do and have in place or it will cost you a pretty penny initially to have someone do it for you. 

A much less stressful option would be to consider duplexes, triplexes, or quads in Los Angeles or Honolulu (both of which I have teams I could refer you to) in the $800 to 1.2mil range. The monthly cash flow would not be nearly as high, but it would be a much easier deal to pull off, and like others have mentioned above, if you position yourself right the markest swings won’t hurt you as much, especially if you zero in on the best locations. 

Either way you have to have your loan ready and be ready for some serious number crunching and have a steller on the ground team in place. 

The easiest option would be to just throw it in a solid SFH in LA or Honolulu or even San Fran (and I have a team there as well if your Realtor doesn't do property management and invest in multi-unit complexes). If you pick a solid neighborhood with excellent schools you should fare well. For example in 2008, when places like Long Beach crashed as much as 60%, places in Los Angeles like Arcadia, Irvine and South Pasadena only pulled back 15% or so.

So, to buy yourself time, you could just grab a nice SFH and then work with a bank like East-West Bank in LA which can very easily open up a 60% HELOC or cash-out refi to let you put that equity when you need it, later on, to work in other places like Cleveland/Youngstown where you could then balance out that property in Los Angels that has not such great income but high appreciation potential with some other SFHs in Cleveland that don't have that great of appreciation potential but have high cash flow. I personally would go with the HELOC so I could just take out a little here and there as needed and start building a nice SFH portfolio one at a time. Those SFHs in Cleveland need to be bought with cash.

If I didn’t have any experience, I would probably just go with a strategic single-family home purchase right now to bide time before I would consider paying the capital gains. I think I would go that route before giving up and paying capital gains. Although if you do go that route, I know some advisors that can put you in funds that can bring in a very solid 6-8% with very little risk why you are waiting around for the bottom. 

Good luck. 

Are any of you willing to share which of your banks are offering forbearance, for how long, and are they tagging the payments on to the end or demanding payment in full? For example, I have loans with Huntington Bank in Ohio and they offered 90 days with payments tagged on to the end and Caliber Home Loans is also offering 90 days but demanding payment in full on day 91. In spite of the CARES Act saying banks can offer up to 180 days plus a 180-day extension, I have not heard of single bank offering more than 90 days. And there is no guidance in the law requiring banks to tag the payments on to the end. Thanks for anyone willing to share. 

 Just curious where you can look this up? Is there a stat that says how many loans out there are owned by Fannie/Freddie? 

I spoke to multiple representatives on the phone. One told me don't put anything for COGS, another said I should put all expenses. One said don't put any rental losses if you don't have any yet, another said estimate out 9 months. I got the feeling none of them thought it was important, just that we got something turned in. And now we learn that it is based on $1000 per employee and it is still unclear whether someone with schedule e income will qualify for anything since at this point it appears schedule e is a no go for PPP and most likely unemployment. Lesson learned about having all the income eggs in one basket. 

I feel your pain fellow investors. Anyone with schedule e income has been totally left out of the equation other than getting a stimulus check. I agree real estate investors/landlords need some advocacy. It wouldn't take much for membership and so much could be provided, I think mainly starring resources and even back-office support. Can you share the link to that other thread I'd like to get in on the conversation.

An email just went out to everyone who applied that the advance is based on $1000/employee and I assume that sole proprietors/ single-member

LLCs would be considered one employee. 

Yes you should apply, it doesn't hurt. But I just learned and probably anyone else who has applied has learned via email from the SBA that the $10K advance is based on $1000 per employee, you may be considered as 1 employee as the business owner/sole proprietor. 

Hypothetically if you have full-time employees your business qualifies. The Applicant only needs to certify that "Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant," among other things as seen on the application. And many landlords/real estate investors will not feel the bulk of the pain until this month. Due to the certainty that losses are almost certain for any landlord right now because of the situation, I think it makes sense to apply for anything you can approval for now because it will take some time to get approved. You will also be able to discuss your situation with the lenders who can give you some better professional guidance as you go through the application process with them. At that time you can decide whether it is in your best interest to proceed with the loan or loans. A lot can change in the next few weeks.

In the meantime, if you haven't applied for the EIDL, I highly recommend you do that as well, because as you probably already know, you may qualify for up to $10,000 in grant money even if your loan application is denied.

@Gabe Meikle sorry I was involved in other things for a while and missed your pm. I have since sent you a pm. 

So I couldn't find anything that did what I needed. I ended up going with Buildium with for managing the properties that I was directly involved that did require screening, lease generation and payments. I found their interface to be pretty intuitive. 

But for everything else, I ended up concentrating on Google's free tools and have ended up pretty much organizing my browser as my own personal website using bookmarks to link to various google folders. And by organizing folders a certain way and using universal naming conventions for all files, it makes it easier to retrieve documents when I need them. For example. I now keep all leases for one property manager in one folder whereas I used to keep the lease in each tenant folder. When a lender needed leases I would have to go into each tenants folder to get them and now I just go to one for each property manager. Making small changes like that has turned out to save tons of time when prepping for loans or shopping for insurance.   

I also learned Google Apps Script and have automated a lot of functionality like pulling pdfs off of emails and throwing them in certain folders automatically while kicking out email reports, as well as building a spreadsheet of all utility activity based on email notices that get sent out by providers. I can even generate importable tenant charges spreadsheets using that technique so I only have one spreadsheet of utility charges to import at the end of each month rather than doing them one by one. 

Unfortunately not all of this is something that is easily shareable but I am working on ways that I can convert this functionally into online tools. I am working on some video presentations to at least share some of the techniques that don't require coding and increase productivity. 

So long story short, I am still in the world of spreadsheets but working much more productively.