All Forum Posts by: Axel Meierhoefer

Quote from @Tim Ryan:

I just cant justify the prices in LA for rentals. Plus the rental controls and non-landlord friendliness.  Makes no sense in spite of the fact that appreciation is great.  I only develop/flip in LA and hold rentals out of state.  The key is to find a good market and possibly connect with a group who helps out of state investors.

 Exactly, that's why our investments are out of state

Quote from @Mark S.:

Quote from @Axel Meierhoefer:

@Jonathan C.

There are a few things that make me wonder when I read your post:

1. What was the goal for you when you bought the property and how did that goal align with what the turnkey provider told you about it?

If I look at my investments in B- and C areas I know that the longer I hold them, the better the numbers typically get. Your case with such a steep loss is pretty extreme in such a short amount of time, but still, I wonder if you bought this property for long-term hold or not?

2. Leveraged properties require patience even if your tenants pay on time and maintenance is limited. If you want bigger returns faster, you would want to buy better quality properties in quickly appreciating markets. So you had a plan, I assume. Was it a good plan?

3. You said you bought from the turnkey provider. They do not take any responsibility for anything and just dump all the costs on you? How did you decide that this was a good provider.? I can't imagine that @Engelo Rumora or any of my providers would do that. It's a matter of the systems they have in place to limit the risk of things like you describe form happening.. Do they have those?

4. I always recommend for my clients (and myself) to run the investment portfolio like a business and suggest to form an LLC (running as S-Corp), even with only 1 property. In your case you have a lot of losses in the time you own the property but these losses transfer through to your personal tax return, so you can recover some of it and not have to count the full nominal amount. Did you consider that?

In summary, if your goals are still similar to what they were when you bought, the location has potential, better vetting of tenants will avoid evictions, etc. it would make sense to keep the property and see if it can live up to the potential you expected when you bought it.

If you think you had false expectations or don't see a probability of recovery, I would also do the renovation and then sell. You can file losses again and the cost of the renovation.

I have never heard anyone recommend an S-corp for rentals.  Did your tax pro suggest this?  Seems incorrect. 

Hi Mark

The S-Corp is for the operations of the portfolio and the mother of the series LLC that is comprised of regular LLC's. Only S-Corps can own other LLC's and it makes sense to have all the rent and other things roll up in one S-Corp and underneath your properties are just sitting in separate regular LLC entities.
I am sorry that I did not go into that detail.

@Jonathan C.

There are a few things that make me wonder when I read your post:

1. What was the goal for you when you bought the property and how did that goal align with what the turnkey provider told you about it?

If I look at my investments in B- and C areas I know that the longer I hold them, the better the numbers typically get. Your case with such a steep loss is pretty extreme in such a short amount of time, but still, I wonder if you bought this property for long-term hold or not?

2. Leveraged properties require patience even if your tenants pay on time and maintenance is limited. If you want bigger returns faster, you would want to buy better quality properties in quickly appreciating markets. So you had a plan, I assume. Was it a good plan?

3. You said you bought from the turnkey provider. They do not take any responsibility for anything and just dump all the costs on you? How did you decide that this was a good provider.? I can't imagine that @Engelo Rumora or any of my providers would do that. It's a matter of the systems they have in place to limit the risk of things like you describe form happening.. Do they have those?

4. I always recommend for my clients (and myself) to run the investment portfolio like a business and suggest to form an LLC (running as S-Corp), even with only 1 property. In your case you have a lot of losses in the time you own the property but these losses transfer through to your personal tax return, so you can recover some of it and not have to count the full nominal amount. Did you consider that?

In summary, if your goals are still similar to what they were when you bought, the location has potential, better vetting of tenants will avoid evictions, etc. it would make sense to keep the property and see if it can live up to the potential you expected when you bought it.

If you think you had false expectations or don't see a probability of recovery, I would also do the renovation and then sell. You can file losses again and the cost of the renovation.

@Yang Zeng Welcome to the Bigger Pockets.

As you can see in my profile, my business and hub is in San Diego, not far from you, but all our investments for myself and my clients are in well performing markets in the Midwest.

We specially in this out-of-state- approach that really requires more than just the properties.

I agree that you should keep a reserve and not spend all your funds but I could help you with 6 properties that would pay you about $5K/ month in cash flow or $60K/year based on your available funds while having about $100K reserve.

I like to help you see the performance difference between our area in CA and the Midwest. It's too much to write down in sufficient detail but I am happy to tell you about in a call if you re up for it. DM me and we can find a time to talk.

Quote from @Devin De Lange:

Hi Everyone, my name is Devin. I'm a real estate investor based out of the Myrtle Beach area. My portfolio currently consists of LTRs and I am actively looking to expand it to include more SFH LTRs, and MTRs (potentially student housing).

Real estate is a passion of mine, and I'm working get my real estate license to eventually make the transition into real estate full time as an agent, property manager and full time investor. 

The biggest hurdle to investing is capital, and I'm always researching ways to creatively finance my next property! 

I'm looking forward to meeting new people and fellow investors, and connecting further. Having a community is so important -- there is no better way to learn new things and help each other than a place where new and seasoned folks can chat it out and connect on something that can change your life!

 Hi Devin

You said you are looking for creative financing. I am working with a creative team that I would be happy to introduce you to if interested.

I always like to get to know the people I refer, so if you re up for it, please DM me so we can set up a chat online.

Quote from @Chris Seveney:

@Axel Meierhoefer

The sec compliance with this will have your head spinning as you would need to make sure each investor had equitable time to use a property as you cannot provide a specific benefit to two investors if in the same share class.

If things go wrong with this or an investor gets upset and sues the risk you would be taking and the cost for D&O insurance would be through the roof to keep you out of prison.

I agree. That's why I am not sure if such a complicated setup is really necessary. I could imagine that something more like a syndication could work better.

One way to think about it could be to tokenize the properties and have the shareholders hold tokens in these properties combined with the right to use the properties that have shares in.

I wonder how you would want to make sure that the numbers work. if it is just a matter of a number of people sharing the properties with each other, you could just do that on AirBnB, but if there ownership is to go farther, some more details would need to be revealed.

Based on what you have described, I don;t really see an incentive for any investor to do a deal like that when staying in other countries can be done with VRBO or hotels, or AirBnB, or many other options.

Quote from @Eric Rice:

@Axel Meierhoefer
Hi Axel, thanks for taking the time to reply to my post.

You are obviously correct in that there aren't inherently any reasons we have to live where our investments are.

Because we are relatively new to real estate investing, I wanted to be close by for convenience mostly. I am focusing on the investment side mainly for the purposes of this post, but we are also moving. I selected places that we are both familiar with and are interested in living just to start. Any divergence is completely fine, as long as it makes sense.

 OK, got it

My recommendation is to focus on performance when it comes to your investments.

@Eric Rice Maybe I am too dense but I read your post a few times and I am missing the separation of where you want to live and what you want for investing.

I mentor people who want to invest in residential real estate to generate cash flow. From LA (I am in San Diego), to get good performance of the investment, I recommend to turn the invests you are willing to make into a small business. (I can expand more about it you are interested).

You or your wife can run it and have all the benefits of real estate investing. Your post seems to indicate that you like to develop a passive income portfolio. That's exactly what we do using 1% and 2% properties in well-performing markets.

Running it as a business means you hire all the needed services. You have property management, insurance, loans/mortgages from banks and lenders, you and tax person, and maybe someone like me who provides you with already vetted deals from trusted providers.

Yu can get some mid-size deals that maybe pay $300/month or less financed deals that pay about $800/month.

All this and a lot more details I am happy to discuss with you and your wife is related to your investing business.

Independent of that should be where you want to live. That's where your list comes in. The only connection I see is the initial cost of the place you get in your new location.

If you move to Austin I would rent right now. The other two locations you could buy a nice place with a regular mortgage. If you or your wife are eligible for VA, even better.

The investing is separate from the place you live. 

I live in San Diego and in Spain and my investments are in the Midwest.

The main reason is the performance of the investments - basically the balance of purchase price and rent income.

If your investing goals change to something else, i.e, appreciation, the situation is totally different.

Quote from @Paul Merriwether:

His strategy is to buy CHEAP properties for $30,000 sell them for $79,000. Then do no repairs and sell the property to investors paying off the property in 5 yr's. While collecting payments for buyer for 30 yr's. He has written a book called Slow Flips. As craziest as this might seem I sold a cheap property to one of his students I just found out the other day for $23,000. This student is said to own over 100 cheap properties. 

His name is Joey Chinese. He has a website with a ton of cheap homes on that says sold. 

 Hi Paul.

I know you and Scott from Skool