All Forum Posts by: Edgar Garnys

Do you recommend working with a buyer's agent that has knowledge about seller financing or can I present the offer to the seller's agent (if the property is on the market) on my own?

Also, should a real estate agent assist me with writing up the contract or should I work with a lawyer? I am hesitant to work with a lawyer as they will likely will require a fee up front.

I know that most purchase contracts have a section that talks about seller financing, so I do not know if it makes sense to create a seperate contract if I could include the terms in the general purchase contract.

I've never used a buyer's agent for SF. All of my buys except one were off-market, direct with the owner.
I offer with a friendly 3 scenario letter of intent. Option 2 is generic SF about 10% higher than the cash out offer of scenario 1.
Then they would ask about it. Tell me more about option 2.

We talk out the details and I fill out a standard PSA and submit to title once signed.

Thanks, Steve! I like the approach of offering multiple scenarios. Can you clarify what the scenarios are again? It was a bit hard to figure out from your response.

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I understand that property taxes are based on the appraised value of the property. If the market value value has gone up significantly, could that also potentially impact the appraised value which in turn impacts the property taxes? What is the best method to estimate property taxes for 2023 for deal analysis purposes?

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Hey all, Happy New Year!

I am looking to take advantage of the seller financing strategy this year. How do I make a seller financing offer?

I know how to run the numbers and understand what the benefits are for both parties, but I am not sure how to present the offer from an execution standpoint.

Do you recommend working with a buyer's agent that has knowledge about seller financing or can I present the offer to the seller's agent (if the property is on the market) on my own?

Also, should a real estate agent assist me with writing up the contract or should I work with a lawyer? I am hesitant to work with a lawyer as they will likely will require a fee up front.

Thanks for your help!

Edgar

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Quote from @Bud Gaffney:

@Edgar Garnys Rentometer is great!

Thank you!

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I am currently analyzing deals in out of state markets. The rent estimates I am seeing vary from website to website which is making it difficult to estimate monthly cash flow. Which websites have you found to be the most useful and accurate? I am hoping to find a website that is free to use!

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Quote from @Basit Siddiqi:

Talk to your CPA as he has your return and knows your marginal tax rate

When factoring in your marginal tax rate, consider

Federal Taxes
State Taxes
Other taxes, such as Net Investment Income Tax, Self-employment taxes, etc

Hi Basit - thanks for the advice. I reached out to my CPA and he was able to confirm my marginal tax rate!

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Quote from @Chris Davidson:

@Edgar Garnys you need to break down your income and taxes. For easy math say you make 100k, and the tax brackets are 0-20k at 0% 20-50k at 10% and 50-100k at 20%.

With that you would pay zero taxes on your first 20k, 10% on 30k (50k down to 20K) or 3k, and 20% on 50k (100k down to 50k) or 10k. So you pay 13k on 100k your marginal tax rate is 13% as that is 13k (tax bill)/100k (income).

You can really go into the weeds on this one but would challenge you with the question of why? Because is it helping you get a better deal or is it keeping you from taking action by analysis by paralysis? No matter what way you cut it if you make money on the deal you will be in a better position than not doing a deal and making no money.

Check out IRR or internal rate of return as that would be much more helpful if you want to dive that deep into the numbers and will be the true rate of return on the investment vs just one aspect related to taxes.

Thank you! It is purely to calculate how much ROI I generate from tax savings. I am not using it to compare investments and it is not part of my decision making process when it comes to purchasing a home. It is just a cherry on top of ROI that I generate from cash flows, debt paydown, and appreciation.

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Quote from @Phil Moore:

The answer to your question is hardly straightforward and contingent upon a number of variables, most of which boil down to your personal financial goals and overall view on the market in years to come.

My first question to you would be: did you purchase this property with an exit strategy in mind? If so, has this investment reached the point from your initial strategy or are you simply shooting off the hip in light of your new tax situation?

I would then ask have you identified where you want to put your money should you decide to exit? You may find that even if you exit, your tax implications for doing so put you in a worse position than if you stayed put. I’m not a financial advisor or tax specialist, so these are some questions that you’ll have to ask those folks.

I appreciate your response, Phil. These are great questions to consider in order to determine my next move. I am happy with the returns I have generated over the past four years. I believe the specific market I am in is becoming overheated, so I do not think there is much more room for appreciation. I also do not believe there are many more levers I can pull in order to boost cash flow, so a 1031 exchange into a market that has room to grow and has cash flowing opportunities might be my best bet!

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Quote from @Taylor L.:

I would not consider debt paydown or tax savings with the same footing as cash flow or appreciation. Cash flow would be first. I'm always evaluating exit options to see if it's preferable to hold. You may be able to 1031 into a higher cash flow opportunity.

Thanks Taylor. I think it does make sense to put more weight on cash flow and appreciation versus debt paydown and tax savings as the latter components seem to be more fixed. I am evaluating other opportunities, so a 1031 exchange would be a good route to go if I find that it is has the ability to produce a better ROI % from a cash flow and appreciation perspective.

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Hello BP Community!

I am reviewing the performance for one of my multi-family investments and noticed that the yearly taxes are going up over 50% as the assessed value has gone up (most likely due to overall market appreciation). This would cause my cap rate to go down from the low 8% level to the high 6% level. My annual ROI % would get cut almost in half as net annual cash flow was relatively low in the first place (less than $100 per door). The rents are already at market rates and I am afraid that I can't push them higher to offset the higher tax expense. I also feel that the annual ROI % from appreciation will not increase as rapidly, so it will make up a much smaller portion of the total ROI generated. My assumption is that the annual ROI % will be ~15-20% assuming rents stay the same, taxes go up by more than 50%, and the value of the home remains constant. I am currently seeing an annual ROI % of 20-25% (excluding appreciation), so I am expecting to see a decline in the annual ROI %.

What would you do in this scenario? Would you sell the property or continue to hold if the total ROI % from cash flow, debt paydown, tax savings, and appreciation is better than any other alternative investment options? I am curious to know your thoughts!

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All Forum Posts by: Edgar Garnys

Edgar Garnys has started 7 posts and replied 26 times.

Post: How do I present a seller financing offer?

Post: Estimating Property Taxes for 2023

Post: How do I present a seller financing offer?

Post: What websites do you use to find rent estimates?

Post: What websites do you use to find rent estimates?

Post: How to figure out Marginal Tax Rate to calculate Tax Savings?

Post: How to figure out Marginal Tax Rate to calculate Tax Savings?

Post: Exit Strategy for Multi-Family

Post: Exit Strategy for Multi-Family

Post: Exit Strategy for Multi-Family