All Forum Posts by: Dave DeMarinis

I’m looking for someone to do a simple mow and blow in SW Huntsville 35805. It is an 8K sqft lot so pretty easy. I think one of the neighbors actually cut it but I got a code violation from the city. I’m gouging to start rehab in a week or so. I’m OOS and definitely don’t want an eyesore and want to keep it cut. I have a couple calls in to Caroline but have not reached her.

Great answer Brian and as usual, candid and insightful. That is the “When ‘1% isn’t 1%’ Rule”

Dylan - I did a significant amount of research on custodians and providers and chose Polycomp. They are out of Roseville and a great mix of high service level and reasonable fees. Equity Trust out of Ohio is the big gorilla in the space. Their marketing is excellent and very informative. 

I decided not to do the checkbook IRA because I was advised the IRS doesn't have a declarative position on it. I know many people do it and I think the probability of an issue is small but disqualifying the account would be very costly for me.

It turned out for my overall strategy, I didn't really need the flexibility of the checkbook IRA. I decided to only include ultra passive investments that didn't have a depreciation component (since that doesn't help in the tax advantaged accounts) into my SDIRA so no need for checkbook/LLC.

Polycomp and Equity Trust are easy to find but let me know if you need contacts or information.

Originally posted by @Costin I.:

@Bhaskar Pandey Do you have substantial equity and/or cash flow from these properties already? FYI, the mortgage note itself is a form of protection.

Why risk the DOS or refinance commercial with a higher rate if not needed?

You still need to worry about insurance, maintenance, property management, etc. regardless. Umbrella insurance is supplemental to regular insurance. Maintenance and proper property management is another form of asset protection. Same with LLC, trusts and other legal asset protection structures/strategies which are a form of insurance against litigation. None give you everything and you still need to learn how to employ them all in your RE investing toolbox, how and when (!) they complement each other and work in conjunction with the rest of tools (like marketing, financing, rehabbing, hiring, etc.).

With an LLC you need to proper maintain the LLC.

And I see you mention "the LLC it would be two partner/owners and I would feel safer" - can you elaborate on that? If you are talking about partnering with someone, that would have its own set of problems and you might want to be careful before forming an LLC with partners and putting assets into it.

 Seriously - a CYA Flowchart? Costin - if I start investing in Austin, you will be my first call for property management based on this chart only! I love the creativity, tongue and cheek approach as well as the usefulness. Well done.

Regarding the topic - Umbrella policy whether you are doing an LLC or a personal property. I have another loop in my flow chart. Will/Can I use one of my 10 mortgages on this property? Yes - then purchase in my name and get permission from lender to move to LLC (have received this every time) No - purchase in LLC and then get commercial financing.

How do I decide which financing I want to use? 

1. Value of property - California OOS investors likely have a 20 to 30X range on their investment values ($50K to $1.5M as an example) in their portfolio. 

2. Planned holding period - the longer the planned hold, the more valuable the 30 yr fixed rate is ...

3. Interest rate environment - in the still low historical interest rate environment, locking in as many 30 year fixed terms as possible is wise I believe. 

Obviously 2 and 3 are based on forecast so #1 is the dominant criteria.

I should have clarified, the factor of 2 would be for ~$80K rental SFH. The homestead exemption is $4K typically. This is off assessed value which is 10% of the appraised value in Alabama. Here is an example which probably helps for Alabama.

Appraised value of $100,000 X “Residential Assessment Rate” 10% = $10,000 (Assessed Value) 

Tax = Assessed Value of $10,000 X “Millage” .058 (Huntsville) = $580/yr

For Owner Occ with homestead, it would be $6,000 X .058 = $348/yr

The rates seem to go from .036 in rural and higher in the cities. All that said, property taxes in Alabama are one of the lowest in the Country and another great reason to invest there.

Hi Andy,

Here is a link for estimating taxes in Huntsville, AL.  It allows you to choose to apply the homestead exemption or not. It also shows you how to find the assessed value if you own it already. I think you are low by by a factor 2 if you are buying as investment property.

You are correct on rental vs. owner occupied. Investors don’t get the homestead exemption. The link below allows you to select that though.

https://www.madisoncountyal.gov/departments/tax-assessor/estimate-taxes

Welcome to BP and Huntsville investing. Regarding Accounting, I would definitely look at Brandon Hall and Hall CPA - he's a frequent BP contributor, guest on the podcast and lives and breathes real estate. He isn't local, but he is a fantastic resource for CPA services to real estate investors anywhere in the US.

You should talk to some property managers in Huntsville about this, who was/is managing the property currently? If you can get real information for the last couple years of financial and vacancy performance, that will really help you. You really want to look carefully at the expected economic vacancy (different than physical) and plan for a lot of turnover which means much higher repair and maintenance as well. 15% each is probably more realistic for vacancy and Repair and Maintenance. CapX is highly dependent on the condition of the property (think roof, HVAC, windows, etc.) I think it will be very hard to hit the 50% rule with this property given the above factors.

Zac at AstroProperty management is a great resource if you are looking for help on that front.

Brian - did you end up selling the property?

Natalie - isn't the cost basis : Purchase price + closing costs + any improvements you made to the property - DEPRECIATION? I think it is still minimal if any gains but depreciation definitely shouldn't be forgotten. (Both in actually taking it and the tax consequences of selling.

Horace - I'm in acquisition mode and would be definitely like to see anything you are selling. If you find me a deal, I want you to get compensated.

Accuspec Services have a good rep and do a lot of business. Matt England Home Inspection also has a good rep. My experience with both of them has been good.

Are you looking for someone who will tear the place apart and provide a report that makes it sound like it will be condemned or someone who gives very practical and pragmatic context and suggestions? It is always good to know those two ends of the spectrum in a market and I haven't figured that out in Huntsville yet. Let me know if you identify those.