All Forum Posts by: Greg Scott

Pretty much everything from the 1970s and earlier, you can just assume it has lead-based paint.  With houses of that age, there is also a high probability it has asbestos, as asbestos was used in numerous products well into the 1980s. The media would have you believe these are both like nuclear waste, but most of the time they are very manageable. 

Testing to prove those things exist opened you up to additional disclosures.  In a well-maintained property, the health risks of either should be low, but the additional disclosures are surprising to tenants and generate a lot of fear. 

Lead based paint is most dangerous when ingested. It is also most damaging to children. Apparently the lead tastes somewhat sweet so small children, and presumably
cognitively disabled adults, might eat it. I've heard some historic houses with original wood windows can get a lot of airborne lead dust from microscopic paint flakes generated by opening and closing windows. In your case, the exterior paint has very low risk to anyone unless someone is eating the paint flakes.

Remediation is always more expensive than encapsulation.  For lead based paint, encapsulation is usually a fancy way of saying re-painting. New paint will encapsulate the old paint.  However, if the paint is already flaking that would require special handling.

I'd get professional painting company to assess your situation.

Congrats and good luck.

I'd recommend against a syndication on a deal this size because you can expect the costs to be $10K+, which means you are giving up a large % of your profit to legal fees. Also, because you made this posting, you have violated the law if you wanted to do a Reg D 506(b) offering, so your options are now more limited.

It would be far cheaper and simpler to find a true partner.

Your mortgage broker is partially correct. 

If you want a Fannie Mae loan you have to wait 12 months.  Here are the guidelines.  Since an agency loan like this will provide the best rates and terms, it may be worth waiting. 

On the other hand, if you are in a hurry, you can get a commercial loan from a bank just about any time.  If you do, you will likely have a higher interest rate and a balloon payment after 5 or 10 years.

The good news is you are in a better position than most Americans, even if you feel stuck.  You actually have a lot of options. 

You didn't give enough info to really form an opinion on sell vs refi.  Ideally, I'd want to know what your current cashflow is and what your projected cashflow is after refi.  That said, will poke holes at some of the other aspects of your proposal. 

Condos (including townhouses) are probably the worst category of residential real estate to hold as an investment property because you do not control a large aspect of the maintenance costs.  Just read articles about what is going on with Florida condos right now and you will understand why. Google "zombie condos" too.  You would do much better buying a single family rent property.

I'm also curious why you went with an LLC and commercial loan. It doesn't sound like you have so many assets that you are a target for a lawsuit. You would get much better interest rate and terms by putting properties in your name, and getting FNMA agency loans instead of commericial loans. Of course you would want to add rock-solid insurance coverage to protect yourself.

Why would you want a fully-depreciated asset?  In that situation, you would have no paper losses to offset your passive income.

Finding a fully-depreciated asset is easy.  Just look for a residential property that has been owned for 27.5 years or a commercial property that has been owned 39 years.  Those are fully-depreciated.  Of course, if you buy them, the depreciation clock starts over.

Thanks for clarifying the carry-forward loss Michael.

I had to chuckle at your second response.  

Would you go to a forum to get free advice on a surgery or would pay for advice from the best surgeon in that specialty?

Your post appears to be leaving out details.

Why would an attorney prevent you from doing something because they are speculating what another company can or can not do?  I suspect they don't want to change all their docs.

Talk to a Qualified Intermediary now.  Fire your closing attorney if you have to .

I have not seen that other states.  Rather than congress, I'd blame the California government's insane insurance scheme. 

Anytime the government tries to control prices, like they do with insurance in California, the market will react.  From what I have read, insurance prices in CA should be much higher than they are now, and insurers are not allowed to raise prices without approval from the State.

In one story, a guy wanted to buy insurance and was willing to pay for it but nobody would insure his Pacific Palisades home.  He went to the state program but his house was above the maximum California would cover, so he was "naked" (no insurance) when his house burned down.

If you are an insurance company hoping to stay in business in CA, but losing money, and are not allowed to raise your premiums, what would you do?  I would probably slip a clause in that says if I go bust, I'm not covering you.

This is one of many examples I've seen where talking to a competent CPA that knows your personal situation will probably save you money even if you pay for the advice.  I'd recommend you start there.

If the quote you have found is correct, then Bonus Depreciation might not be the most financially-friendly choice. A competent CPA can help select the depreciation methodology that best suits your needs.

FWIW, REPS requirement is 750 hours

Yes, insurance has been challenging.  Another reason properties have been on the market a long time is unrealistic expectations of sellers.  They may have had a BoV from a few years ago.  With higher interest rates cap rates have expanded and the property is no longer worth that higher price, but some owners are still hoping to get that high price. 

All that said, there are always good deals to be found and in the apartment space, and you often have to create the good deal through value-add strategies.