All Forum Posts by: David Edelstein

Scranton war zones? That's a stretch, it ain't no Wilkes-Barre. It has its good and not so good areas but Scranton PD keep a pretty tight lid on things.

Adam, definitely interested, please send to my email. I also sent you a BP message. Thanks!

I just went into contract on the sale of a NYC apartment and am looking for suitable 1031 replacement properties. I'm interested in multi-family properties within 2-hours of NYC, especially in Wilkes-Barre / Scranton area as well as anywhere along the I-80 corridor from NYC to PA. Will have $1 mill cash, interested in leveraging it to maximize cash flow. Ideally looking for 10-11 cap rates. 

I'm looking to 1031 an NYC apartment into an apartment building and/or multi-family portfolio in Scranton, PA. Will have ~$1mill cash and can leverage up to ~$3-4mill. Looking for best initial cash-on-cash returns plus value-add opportunities. 

There are two properties, the investment property to 1031 and my primary home. I need $100k out of the investment property to lower the principal on my primary and refinance it. I am already planning on selling the investment property and doing a 1031 into another deal. The investment property is worth $1mill. What is the best way to get the $100k I need? It would be more economical to sell the investment property and take the $100k from the proceeds. If the replacement property is $1mill or more, now with an additional $100k mortgage, is it still a legit 1031? Should I cash out refinance the investment property to get the $100k before I sell it? This would be more costly with the refinance fees, etc... 

Thanks for the feedback!

David

I am starting a new house flipping business and have questions on how I should set it up.

1. To start the company I will take a cash-out loan on an existing investment property. This will be roughly $500k.
2. I'm going to flip house $50-$100k purchase price and sell them for a $20-$40k profit after renovations. These can be in any of (4) states PA, NY, NJ or CT.
3. How should I setup the business to do this for the best possible tax scenario?
   1. LLC as an S-corp. I've been reading this is the best way? Does it matter what state I set it up in, any benefits? I live in NY so I figure that would be the easiest?
   2. Should I set up payroll and pay myself? Should I start this right away and start paying myself a salary from the $500k? and pay taxes on that? Would hate to pay taxes on money from a cash-out refi, but if it makes sense then.
   3. How much should I pay myself?
4. I want to quit my job and do this full time, but I won't make a sale on a house for probably 4-6 months.
   1. Again, thinking about how I should be paying myself and payroll taxes during these initial months with no income coming in.
   2. Also, need to think about building up the business credit for future funding of developments, etc. A good reason to start paying a salary (and taxes) off the initial $500k?

Finally, I'm in NYC (Brooklyn) any recommendations on a CPA that I can work with? 

Thanks ahead for the input, all the best!

Thanks Mark, that's good info to know.

Thanks Dave, quick response and great answer. When the time comes, I will go for an extended 1031 and as a last resort use the reverse, if left with no options and can get the financing lined up.

Here is the hypothetical scenario. The exchanger owns a property that is worth $1.4m with a $300k mortgage. Upon sale of the property the exchanger walks away with $1m. The goal is to perform a reverse 1031 exchange. A suitable property is located and an offer to purchase is accepted at $2m. The question is: What happens in terms of funding the deal while the transaction is still in the intermediary stage:

1. I'm assuming the seller of the replacement property will require a good faith deposit. Is this a correct assumption? What is a reasonable amount that would be expected?

2. I'm also assuming, for the seller of the replacement property, he would want some guarantee in the form of cash held in escrow during the time the transaction is in the intermediary stage. Is it to be expected that the full purchase price worth of funds need to be held by the intermediary? In this case $2mill? For potentially 180 days. If not how much of the purchase price needs to be held by the intermediary? Also, what happens if the exchanger doesn't sell the property at the end of the 180 days, what is at risk?

3. If the answer to #2 is yes additional funds in excess of the good faith deposit are required, then what are the options for the exchanger to obtain these funds before the sale of the existing property? Assume the exchanger has no other funding to cover the $2mill other than the proceeds from the sale of the existing property.

4. Is it a standard thing that a bank will provide a loan to cover the intermediary $2mill dependant on finalizing the loan value once the existing property sells? i.e. the final load amount would be $1mill.

5. Is it even possible for the exchanger to attempt a reverse 1031 deal if he has no other money other than the funds that will be received from the sale of the first property?

Thanks for the feedback!

Dave, thanks for the explanation, I appreciate it.