All Forum Posts by: Greg Scott

Hopefully you raked in enough cash to buy a warm jacket!

Love the work ethic. Most don't want to work.  But, that is where the money is.

I pick up trash at our properties.  I have many times jumped in the dumpster to get large boxes or furniture out to break it down. 

I"m sure you've done similar.

If your 401K is with your current employer, it is (effectively) impossible to make it an SDIRA.  If it is with a former employer, simply create an SDIRA and roll it over.

Before doing any of that, you should familiarize yourself with Prohibited Transactions. Based on your description, it sounds like you would violate the self-dealing rule and could put your SDIRA at risk.  To avoid Prohibited Transactions, SDIRA investments really need to be passive.

Oh, I'll also mention that SDIRAs are subject to UBIT tax.  Unless you have a Roth, you can easily pay much more in taxes by investing in real estate through an SDIRA.

You should vet the company to ensure they have the resources to pay the rent.

You ALWAYS do background checks on the people living in your property because if you let in an axe murderer and they harm someone, you are likely to get sued.

Whether or not you charge an application fee is up to you.  During COVID we tried not charging an application fee and it backfired.  If they have nothing to lose, more unqualified people will apply.

I'd talk to more contractors on how to solve the problem. The easiest solution is typically keeping water away from the wall.  Improving grading or having downspouts drain into pipes that move the water away from the house often solve the majority of issues.  Fixing the inside of the house is usually the last resort.

Regarding disclosures, it wasn't like the sellers were able to pull one over on you. You found it during inspection and got a $5K discount. You KNEW about the problem, got compensation, and bought anyway. I'm no attorney, but I don't think you have a leg to stand on regarding disclosures.

That is an added layer of complexity.

You should do all the same level of due diligence you otherwise would to buy the property.  On top of that you have to conduct due diligence on the leasee.  Also, because you are at risk if the leasee fails to execute properly, you had best have a great lease and the ability to check on their performance.  I would say that is not a great way to start.

The problem with trying to invest $500,000 is you really can't use the same strategies you use with $50,000 and be effective.

When I was buying SF houses I could buy them (using hard money) for $25K out of pocket.  Those deals still exist, I see them every day.  That means to deploy $500,000 you are going to have to find 20 houses like that, rehab them, put a tenant in them, and then manage them afterward.  That takes a lot of effort.

I'd encourage you to start thinking bigger. In an apartment complex or other commercial property it is much easier to deploy larger chunks of money and get it working faster.  On the other hand, you had best know what you are doing because you are putting in larger chunks of money.

I agree with your comments on climate change and I am bullish on the Midwest, particularly the Great Lakes area.  Just a word of caution about Metro Detroit, it still has a large portion of its economic activity related to automotive.  (I worked for Ford for 26 years) Real estate values will track the health of the auto industry.

If you are brand new, I wouldn't self manage from OoS. There are too many pitfalls.

It sounds like the reason you wanted to do this was to achieve Real Estate Professional Status. To achieve REPS status you need to be actively involved in your rentals.  "Active" doesn't necessarily mean you are self-managing.  Talk to a competent CPA.

BTW, the real value is not derived from saving a management fee.  The real value is on the buy side.  If you buy turnkey rentals, you will make money slowly.  If you buy junkers and fix them up, you can make much larger returns.  The harder part is managing a rehab from afar.

LOL   That is exactly what I would expect from the Detroit City Government.

If you go there, they are likely going to say you first need a license from a different office on the other side of town and when you drive there, they will say you need an appointment with them, but they only have appointments the third Thursday of each month.  

@Drew Sygit  Any suggestions?

What has led you to the conclusion that it is malicious?  Have you run to ground all the more common issues?

I'd start by giving all residents the required notice (usually 24 hours) and go inspect the units as quickly as you can.  There is a decent chance you will find a toilet with a busted flapper. 

If that isn't the issue, the next most likely issue is an underground leak.  On older properties, this is very common.  You would need to hire a leak detection company to find out.  The easiest ones to find are hot water leaks because usually the resident complains that their floor is hot.

If you eliminate those, just have your PM stop by the property randomly to listen for running water. You should be able to narrow it down quickly.

You are definitely going to want to get a lawyer and as soon as possible.

This will sound harsh.

In your story, you have made a number of very poor decisions about how you purchased and managed this property. Hopefully you haven't made equally poor decisions when you created and how you managed your LLC. If you have, you have put yourself at great personal risk.

Again, I recommend you get a lawyer as soon as possible.