All Forum Posts by: Dennis Bragg

Hi @V.G Jason and Lilia,
I came across this thread while digging into discussions about real estate strategies, and I couldn’t agree more with the focus on long-term thinking. Lilia’s breakdown of what to consider before investing is something I wish I’d read when I started.

To add some color, I had a client a few years ago who purchased a duplex in Austin with a plan to hold for 12+ years. His focus was on location, tenant demand, and ensuring the property could handle at least a 1.25 DSCR even in a downturn. It wasn't teh flashiest deal, but it's been rock-solid through rising rates and market swings. By prioritizing fundamentals over chasing ROI benchmarks, he's now sitting on an asset that's appreciated 30% and maintained strong cash flow.

Personally, I once miscalculated reserves on a triplex I bought early in my career. It was a 1970s property, and when the plumbing needed an overhaul, I found myself scrambling to cover the costs. That experience taught me to always overestimate CapEx and vacancy buffers... it's much easier to sleep at night when you've got those cushions in place.

From what I’ve read in Bloomberg, these challenges aren’t unique, especially with rising rates. How are you all adapting your strategies with the current market changes, like higher interest rates or evolving tenant demand?

Hey @Brett Lambert, this sounds like a unique gem tucked into the majestic Redwoods. In my experience, a property with multiple cottages and outbuildings can provide all kinds of creative strategies...some folks try short-term rentals or even specialized retreats if local regulations allow. I remember a buddy who once represented a client in the Santa Cruz Mountains.. this client turned an old barn into a shared art studio and invited local artists to rent the space, which ended up boosting inccome in ways they never imagined.

The Redwood market can be tricky because of environmental restrictions, zoning quirks, and limited inventory. As someone based in San Diego, I’ve also noticed that investors eyeing California real estate tend to focus on potential future development or expansion (especially if you have the patience to navigate local regs). The fact that you already have multiple units fully rented is a big plus.

If I were analyzing this, I’d start by verifying each cottage’s rental history, condition, and potential for adding more units or amenities. I might also compare it to other markets..like Austin or Phoenix..where property prices have been shifting (from what i read in CNBC) but still show growth potential. It really helps to see how Redwood properties stack up in terms of returns versus popular metro areas (from what I’ve heard).

What would you do first if you were to break down the property’s biggest potential value-add?

Hey @Hannah Liu, great to have you here! I can feel that spark of excitement you’ve got.. it reminds me of the thrill I had when I first dove into real estate decades ago. Believe me, I’ve seen my share of ups and downs: from navigating interest rate spikes to figuring out out-of-state managment back when online tools weren’t half as good as they are now. After 20 years in the investing game, plus working as an investor-friendly agent, I’ve learned that hesitation can feel like a big hurdle but often ends up being the push you need once you break through it.

I’m personally based in San Diego, California, and licensed here, but I’ve also looked into projects across the country with folks who sought better cash flow. Sometimes that means exploring markets like Omaha or Austin or even Chicago if the numbers pencil out. A good friend of mine recently managed to pick up a modest duplex outside Phoenix that looked risky at first glance.. low rents, older neighborhood.. but with a few smart upgrades, it became a steady earner in under a year.

You mentioned your worries about remote investing and the challenges of managing properties from afar. Those concerns are totally valid. Plenty of people in California look for more affordable opportnities out of state, so property management becomes key. From what I’ve heard, there are reputable local management companies in regions like San Antonio or Omaha that handle everything from screening tenants to arranging quick repairs. I recall reading about it in CNBC...

The quest for solid returns in our current market might feel daunting with interest rates where they are, but the good news is.. if you find the right deal and set clear criteria.. like a minimum cash flow target, or a plan for eventual refinancing.. your numbers can still work out. Sometimes it’s about being a little flexible on location or property type.

But enough about me: Where do you see your first property purchase happening, and what’s your biggest question right now about making that leap?

Great discussion you started here @Thomas Cheek! I found this thread while researching how market trends have impacted 1031 exchanges and investment strategies in San Diego over the past year. I know the post is a pretty old one, but the topic is timeless, especially in a market like ours.

First, I'd like to echo @Michael McLoughlin - the sentiment about 1031 exchanges offering a direct route to deferring capital gains taxes. They can be powerful, but I’ve seen firsthand how crucial it is to plan for them strategically. For example, a client of mine decided to exchange out of a rental property in Vista into a multi-family property in North County. They purchased in 2016 for about $555,000 and recently sold for $1.25 million. The appreciation was great, but the real win came from reinvesting those gains into a property generating double the cash flow.

However, I also see the appeal of funds in certain situations. A close friend of mine, who’s also an operator, shared a story about an investor who didn’t have the time to manage a property directly but wanted exposure to the San Diego market’s growth. They joined a fund led by someone they trusted, focusing on value-add multi-family deals. It worked out well, but only because they knew the operator’s track record like the back of thier hand. If you’re considering a fund, I'd say: trust and verify.

As for market shifts, let’s talk hindsight. Back in 2015-2017, property prices in Vista and Chula Vista hovered around $500k to $600k. Fast-forward to 2024, and many of those properties are selling for over $1 million. It’s wild to think about how investors who took the plunge then have seen such substantial growth. This underscores why timing and long-term vision are key in real estate, especially here in Southern California.

Speaking of emerging opportunities, three San Diego neighborhoods I feel are becoming increasingly attractive for us investors in 2025 and beyond:

Civita (Mission Valley): A master-planned community offering sustainable urban living, with parks, mixed-use spaces, and residential developments attracting high rental demand.

East Village (Downtown San Diego): A lively, developing neighborhood with residential and commercial projects catering to urban professionals.

Barrio Logan: A revitalized cultural hotspot, ideal for investors looking for appreciation potential near downtown.

It’s wild to think how areas like these have grown over the past decade. A property in Vista that sold for $555k in 2016 is now fetching over $1.2 million... similar stories are playing out across San Diego. What’s a neighborhood you think will be the next big thing in the city? I’d love to hear what fellow investors think.

One question for the group: For those leaning toward funds, what criteria do you use to vet the operator? And for fellow investors doing a 1031 exchange, what’s your favorite neighborhoods or markets to exchange into these days?

Hi Cathy,

I came across this thread while researching for a friend who's diving into BRRRRing in San Diego. What caught my eye was how timeless your question is - high prices and tight cash flow are still big challenges here. Let me share a story about another investor I worked with. They teamed up with a contractor to buy a small multifamily in Oceanside. After tackling affordable upgrades like kitchen makeovers and adding an ADU, they focused on medium-term rentals for traveling nurses. Within a year, the property was cash flow positive and had appreciated significantly.

For you, I’d suggest:

Look into ADU laws - They’re a game-changer in San Diego, especially if your partner is handy with renovations.

Expand your market - @Dan H. makes a great point - it's a competitive market here! And Chula Vista or Escondido are great areas for first-timers who want to stay near SD but reduce entry costs.

Network at local meetups like “Beers and Deals” - The connections you’ll make there can open up off-market opportunities.

Where did you end up starting starting - SD, or did you end up in nearby markets to get your first win?

Hey @Carolina S.

Thanks for bringing up such a nuanced situation.. these kinds of decisions can get pretty overwhelming with all the moving parts. Since your post is a bit older, I stumbled upon it while researching strategies for navigating 1031 exchanges in this tricky high-interest-rate market. It seems like a great time to revisit the conversation, especially considering how rates and market conditions have shifted over the past nine months. I'm curious how you ended up handling it?

Your dilemma boils down to two priorities: maximizing your investment growth versus creating financial stability for your personal residence. Here’s how I’d think about it:

Option 1 - Proceed with the 1031 Exchange:
The main advantage is deferring those capital gains taxes and keeping more capital working for you. However, as you mentioned, financing through an LLC means commercial loans, and 9% rates are nothing to sneeze at. One pssible workaround might be exploring smaller community banks or credit unions. I've had some success steering clients toward portfolio lenders who can offer more flexibility than the big banks.

Another thought: have you considered diversifying into asset classes that might generate better cash flow even in today’s environment?

Option 2 - Focus on Your Primary Residence:
This is a more conservative route but could make sense if the primary home rebuild adds substantial value. You'd avoid higher financing costs for your personal project and simplify your financial picture. The trade-off is losing out on potential growth from a reinvested 1031 exchange, but if you're thinking about a HELOC later to invest again, this could bridge the gap.

What I’d do in your shoes:
If it were me, I’d run the numbers on a worst-case scenario for each option. What happens if rents stagnate or even drop? How much equity is “trapped” in thier primary residence after the rebuild? When I worked with a friend in a similar situation, they ended up splitting the difference by moving forward with the 1031 for just one property instead of two. This allowed them to keep part of their funds liquid for their personal project while still deferring some taxes.

Also, I noticed some great advice in earlier replies, particularly about HELOCs and the pitfalls of LLCs for 1031 purposes like @Maureen McCann explained it perfectly. One additional thought: a disregarded LLC might work for you if structured correctly. However, if it's not necessary for liability protection, you might avoid the headache altogether and just beef up your umbrella insurance policy.

What’s your take on this now? Did you decide to go all-in on one of these options, or are you still weighing them both? Curious to hear how things turned out and whether any unexpected challenges came up in the process.

We like Edwin Brown, and his team as they are effective and not crazy expensive. They also help prepare our seller presentations and make sure contracts get signed. I can PM you his details.

Hey everyone.. I noticed this thread was updated around nine months ago, and I stumbled on it today while poking around for info on Opportunity Zone Funds. I read an article in Forbes that talked about how certain areas can transform quickly if the fundamentals line up.

@Sawyer Smith, you mentioned that you’d be running the fund yourself.. it reminds me of a situation my cuosin found himself in a while back. He launched a small OZF to revitalize a vintage office building in a transitioning neighborhood. One thing he didn’t anticipate was the complexity of the reporting requiremnets, especially if he wanted investors outside his immediate circle. Meanwhile, a regular 1031 can be less complicated to manage if your main focus is simply deferring gains.

Considering how property values and financing rates have shifted these past months.. do you think an OZF might be a better strategic move than a 1031 in your situation?

Hey there, everyone.. I realize this thread is over a year old, but I actually stumbled upon it recently while digging into some 1031 exchange research on Google. According to a piece I saw in The Economist, it’s surprising how certain markets keep evolving from year to year.

@Namal Burman, your post caught my eye because I had a former client-now a good friend-who found herself in a similar situation. She had a rental in San Diego that started to feel like a money pit. After a few too many midnight leak repairs, she wanted to offload it but didn’t want a big tax hit. She ended up using a 1031 to exchange into a smaller multifam near Austin that better aligned with her long-term goals. Thats kind of the beauty of thes exchanges.. you get to reposition your capital, ideally in a property that ticks more of the boxes you need.

Now, thinking about older buildings.. some folks underestimate how well older properties can hold up if they’re in a good location. But if you’re questioning whether your condo will keep appreciating the way you want, and you’re set on staying in real estate investing, a 1031 could definitely be worth exploring. Maybe you pivot into a multi-family in Phoenix or a single-family in Omaha.. from what I’ve heard they can still provide stable cash flow. Keep in mind, though, if you just sell outright, you could be looking at capital gains and depreciation recapture, so it’s worth crunching the numbers with a proper tax professional (I’m not one, by the way).

What do you think the rest of the community has seen happen to property values since last year, and do you believe it changes the 1031 conversation?

Hey Keith..

Congrats on your recent house hack-bringing your portfolio to five doors is a big step! Your question about LLCs is something many investors wrestle with, and the answer really depends on your long-term goals and how much risk you're comfortable taking on.

For smaller portfolios like yours, setting up separate LLCs for each property can provide additional liability protection, but it also comes with added complexity and costs. Think about filing fees, separate bank accounts, and maintaining compliance for multiple entities. In Vermont, LLC formation fees and annual report costs can add up.

A good friend of mine, Jason, started with five doors and used a single LLC for his properties initially. He liked the simplicity but later switched to multiple LLCs once he expanded to 15 doors. One hiccup he faced was forgetting to update his umbrella insurance policy, which left one property exposed for a short time. It's things like that which make this decision more than just a legal one-it's about how organized you can be.

Something else to consider: lenders often want you to personally guarantee loans, even if the property is in an LLC. This means the liability protection might not fully shield you from risks. Speaking of loans, refinancing or selling properties inside an LLC can sometimes complicate things.

Since you’re house hacking, also think about your tax strategy. LLCs can help streamline bookkeeping, but they don’t offer tax advantags unless structured as an S-Corp. Have you talked to a CPA about this? That’d be my next move-they can tailor advice based on your portfolio and Vermont's specific laws.

By the way, if anyone here has experience juggling multiple LLCs at the 5-10 door stage, how have you handled the balance between liability protection and administrative overhead?

Let’s hear what others think.