All Forum Posts by: Greg Scott

It is worth noting that no matter how profits are split, all of these scenarios would likely require the assistance of an SEC attorney to create a PPM.

The example you used was a pre-determined profit.  In reality, at the start of an investment you don't know exactly how the investment will perform. When thinking about how to structure a deal, it is more useful to wargame different scenarios. What if the deal loses money? What if it only makes $10K profit?  What if it makes $200K profit?

Personally, I will never invest in anything with a Preferred Return or Waterfall structure. (I would not offer one as an investment either.) Through wargaming, it is easy to see how the motivations of the operator can become very misaligned from that of the investor when they use a Preferred Return or Waterfall structure.  You don't get that with a fixed percent profit sharing.

A radon mitigation system is simply a fan and a duct.  It is about as complex as a bathroom fan. The fan blows the air from one location up and out of the house.  If the fan is working the system is almost certainly functioning.

There are very cheap testing kits that involve opening them and placing them in areas likely to have radon.  The last time we refinanced an apartment, regulations required that we test radon in every bottom-level apartment, which was over 100 units. (What a big PITA!)  We had to place the tests in every unit and then re-collect them a few days later.  To avoid making residents fearful of potential radon, we simply told them that the bank was requiring an air quality test.  Fortunately, no radon was detected.

Smells like fraud.

@Brian Bisdorf

It sounds like you have already decided you want to go the Section 8 route.  In your original post, you asked whether or not Section 8 was a good idea. I pointed you here, where people with decades of experience are telling you there are some significant downsides.

In your other post, you said you were a flipper and this would be your first LTR.  Many of the people on this thread specialize in LTRs.  What sort of due diligence do you think you will be able to conduct on the prospective tenant that these investors have not done?

https://www.biggerpockets.com/forums/921/topics/1230675-why-...

Is your GC saying they stole the compressor or the entire HVAC system?  If they went inside and stole the furnace / coil, you may have a case. What does the police report say?  (FWIW,$8K on just the compressor seem excessive.)

Otherwise, unless your contract with your GC says they will provide 24/7 surveillance, or you can prove the AC was never installed, you own the problem.

If the property has been vacant for more than 30 days, most policies won't cover vandalism unless you have added a Builders Risk Addendum.

Quote from @Laura Casner:

Quote from @Ronald Rohde:

what does your lease say about re-measurement rights? are you past that window? what do you pay for rent? what is the monthly delta?

 Our lease doesn't say anything about re-measurement and therefore there is no window. The landlord simply refuses to accept our comments and just says "well you signed a lease to pay X$ per month." It's clear they are not willing to even talk about it and we would have to make a big issue of it - threaten to pull out of the lease or bring in lawyers, and that doesn't seem to make a lot of sense because it will just make our lives hell and cause our business to suffer. I guess they know that. The difference would be $6,800/year with a 3% increase over 5 years. 

If you don't want to pursue a change in rents now, at a minimum it appears you can use this as a negotiation point for a lease renewal.

@Johnny McKeon

I'm not a CPA but my experience says, yes, you probably can.

To avoid confusion it is helpful to separate out the concepts.

REPS - Roughly, the requirements are minimum 750 hours active in real estate and those hours must exceed any hours in a non-real estate job.  You can get REPS status regardless of how you handle depreciation.

Straight Line Depreciation - This is taken 27.5 years on residential and 39 for commercial.

Accelerated Depreciation - This requires a cost segregation analysis so you can divide the total value of the building into 5, 7, 15, and 27.5 (or 39) year depreciation buckets.   The attached chart shows a good example of why this is helpful.

Bonus Depreciation - This allows you to accelerate the depreciation even further, deducting anything with a 15 year depreciation life or less in the first year.  This rule has been phasing out and for 2025 has 40% of the benefit unless the new administration renews it.

Have you checked with an SEC attorney to make sure you know how to legally raise money?  Many people in the past few years that were simply raising money for funds or syndications, are now in serious legal trouble.

Condos are problematic as rent properties.  Instead of keeping them, I'd look to sell them and buy something more suitable as a long term rental.

If you want to know why I have such a strong opinion on this, just google the following:

- HOA Special Assessment

- Florida Condos 2024 - search for news on the new laws

- Zombie Condos