All Forum Posts by: Garrett Smith

Greatly appreciate all the input from the community.  Thank you all very much.  Unfortunately I didn't inherit the property but that is a good question @Patricia Hinojos.  @Brandon Bruckman very much appreciate the info and am looking at the buy direct option as well. I have a few other properties in the OKC market and a PM out there but it is time consuming to find the right deal (trying to start now before the sale - reaching out in as many potential ways as possible). I have spoken with my CPA a bit about this situation and she is pretty knowledgeable but due to tax season and the fact that she isn't able or willing to directly handle the 1031 I wanted to reach out to a few others for input. I appreciate it all and will not infer any of it as legal advice. I am interested in the Delaware Trust info and if possible reach out to a few of you directly for additional input, asset protection is on my list of to-do's as it is. I'd heard of DST's before but wasn't aware of their 1031 benefits. @Dave Foster I'm not familiar with NNN's but will reach out to you to discuss more if you're available. I've definitely been on a journey in discovering more of the nuances with real estate and continue to do so (makes for long days at work and long nights trying to learn more and build my real estate investments but hopefully worth all the effort - and honestly it is pretty fun). Can't thank you all enough for the support, if there is ever anything I can do in return or provide business to you directly, don't be afraid to reach out. My hope is that my business in the community continues to grow.

Backstory:  I'm in the process of selling a property that has had a significant amount of appreciation.  It was purchased as a primary residence and I "house hacked" it for several years before relocating with work and it has remained as a full rental unit ever since.  However, due to the fact that there is no cash flow from the property and a significant amount of equity tied up (should net ~$250-300k), resulting primarily from the appreciation and essentially earning no return on that "new" money...along with the archaic laws/rules Seattle has/is enacting that will remain long after COVID ends, I decided to sell.  Fortunately the tenant was amenable to this (in Seattle you can not force them to leave, even to sell...even if their lease ends - not sure how that's even legal but that's a whole different post) and actually decided to leave earlier than their lease date.  Unfortunately, I haven't lived there for 2 of the past 5 years so my best option is to defer tax payment via 1031 as far as I can tell (if anyone else has a different take, I'm all ears). Also note, I did look into rate and term as well as a cash out refi to put some of the equity to use and/or enable the unit to cash flow and reduce the interest rate but ultimately the current state of Seattle, their rent freezes and anti-small landlord doctrines forced my hand.

Question (finally...I apologize): Is it possible to 1031 gains from a sold property into an interest in a syndication if you're a passive investor and not the sponsor? Also, as a passive investor, can anyone give me the broad strokes of any tax benefits they may also be entitled to similar to a solely owned piece of real estate or are those deductions pretty much off the table? I'm looking to find a good investment for the gains I should make but the $ amount is larger than I'm used to handling, my time is limited as I have a full time day job (that I enjoy and am not ready to part with), and I'm not opposed to purchasing another property (I have 3 SFR out in OKC) - preferably a larger Multi family or small apartment complex at this point. But due to time constraints and needing to role the funds from the future sale of the Seattle property relatively quickly, I thought syndication may be a good avenue. Any input would be greatly appreciated and again I apologize for the long winded "story" to preface my situation. Thank you in advance.

@Eric Fernwood awesome post Eric, I enjoyed seeing how in depth your response was and the info-graphics you used are very cool.  Wondering, what type of returns are your typical clients looking for or seeing (obviously many variables here but assume $350k cost 20% down @ 4% interest - call it $1,500 PIMI...Guessing something like that would get you a 3bd/2bath in those area codes ~1,500SF and rent for around $1,700, but I don't know the market there so forgive my ignorance as I could be way off...just using hypotheticals. After property manager and repairs I'm not sure I can see much meat on the bone there.  I can see your analysis showing the most stable investments and to some maybe that equates to best but as far as returns go I guess I'm not sure how to make that work unless I'm severely undercutting the rental price or if you were able to procure the property at a huge discount.  Not at all trying to be argumentative here, I truly do appreciate and like your response but hoping maybe you can explain the return side to go along with your analytics?

@Account ClosedThanks Chase...I'm pretty actively looking into the OKC market, there seem to be quite a few opportunities for buy and hold (I've seen quite a few down in the Norman area that look like they have potential...any thoughts on that area?).  If you're interested in talking, let me know, I'm going to talk to a couple other realtors in the area tomorrow and see if I can find one that would be mutually beneficial for both the realtor and myself and an overall good fit.  As you said having a good local person with good prop management/handymen/contractor contacts is what I'm hoping to find and in return if I pay a bit of a premium for those services, I think it would be well worth it given my circumstances.  The downside I guess is that I know it can be frustrating for realtors at times dealing with an investor but I try to do my part to look for deals as well and have a pretty good idea of what I'm looking for, I'm very responsive and I am committed to actually pulling the trigger. Even though I'm working out of state, I do have the ability to spend every other Thurs-Sun. to get the ball rolling if need be.  Anyway, if nothing else, thank you again for the reply, I very much appreciate it.

@Terry LaoThanks for the advice Terry, I will let you know if I end up buying out there.  I'm up there about every other weekend to visit my girlfriend (I'm currently working out of state in AZ) so have the most opportunity to actually drive that market.  Always appreciate the people on here willing to share their knowledge.

@Andy EakesThanks for the reply.  I'm not opposed to either turn key or fix and hold.  I look at it more from a numbers stand point...in other words if I came across a turn key that was at market value, if it truly cash flowed (after PIMI, prop manager, repairs, cap ex., etc.) and it wasn't in a market that was shrinking I'd be all about it...The downside is that I think they're difficult to find unless you have a marketing strategy and if you get it through a realtor it will likely tie up capital.  The challenge for me with fix and flip is building a team to help with the fix side of things (working towards that end though) but I do like that approach of getting in at a discount and building some equity into the property...plus the potential of refinancing and pulling the intial investment back out.  I can definitely appreciate the patience game and I'd much rather lose a deal if it doesn't stand up to my numbers than raise my purchase price and try to somehow make it work after the fact.  Thanks again for your insight.

@Bill B. Do you have any experience with Multi Families in Vegas?  Seems like there are a few popping up that look promising (several in a complex of 4 plexes)...wondering if they cash flow well or if there are issues with multis in Vegas.

Still pretty new to this site and continuing to try and reach out to people and get to know this community. I'm looking to buy and hold long term, have some capital and the ability to tap into equity in a property I own as needed but Ideally, I'd like to purchase something with traditional financing and rent it out long term (open to SFR or Multi). Unfortunately I travel every few years with my day job so anything I do I will need to set up to manage long distance. Pros: Get to set up systems to be more hands off locally speaking, open to just about any market Cons: A bit difficult to develop a sense of the local areas, difficult to narrow down a market to grow in. A couple questions I had for anyone willing to provide their 2 cents are:

1.) Any insights/advice on how to narrow down a market - specifically to buy and hold I'd appreciate any advice. I'm looking at Boise, ID; Las Vegas, NV; Oklahoma City, OK and I've heard on the BP podcast some people delving into the Milwaukee, WI market.  I realize they all vary in location significantly but they seem to have a good price/rental ratio.  Currently leaning towards Oklahoma City and recently placed an offer that wasn't successful yesterday but already looking to the next one and meeting with a few agents via phone tomorrow to see if I can develop a relationship that will work for both parties.

2.) Any advice on managing from a distance?  I know a common one is to partner with someone and I'm open to that but seems like the buy and hold structure is a little more challenging to partner with someone

3.) If there's anything I can do to help in the community, I'm more than willing to jump in.  I have a background as a PM for a very large general contractor (mostly building bridges and other infrastructure work), and am well versed in high stress environments and managing many moving parts and pieces as well as tracking metrics for improvement.

Appreciate the help and if anyone has experience they'd like to share in the markets I listed above or think I should look at any others I'm all ears.  Excited to take the next steps and continue with my second property (first is in Seattle)

Thanks @Curt Davis, appreciate the insight. I'm seriously considering it as the best option. On the west coast where I have spent most of my time in larger cities the BRRRR seems hard to come by but I like the model the best. I may need to take the leap and try finding someone to partner up with in a market that has lower entry prices like you've written above. So many choices but my plan is slowly coming together and I appreciate the response.

Looking for some insight on a situation and first time on here posting (still exploring and trying to filter through everything) so any advice is greatly appreciated. 

"Hypothetical" Situation...Person owns a house (townhome with no HOA, one adjacent unit with good neighbor) in Seattle.  Purchased back in 2014 for $320k with $16k down, est. value now $640k, still owe $257k and rent it out.  Current mortgage rate is 4.65%, payment all in is $2,100.  Rent income is $2,395/month.  Pay a property manager 10% and current tennant paid 18 months up front (lease due up in May).  So in reality it doesn't really cash flow if you consider repairs.

Looking to expand portfolio and have an end goal of procuring enough doors to create a passive cash flow ~$10k/month (thinking of sticking with single family and small multi family homes) and using the BRRRR method to help get there.  Possibly flip to create more capital but it's not something that's planned to do continuously.  A few items to consider...Person works a lot of hours in a day job ~70hrs/wk Mon-Sat. and makes a good income (can typ. save around $5k/month and have about $50k saved).  Also, person moves from project to project (often state to state) every few years for said job.  Current markets exploring are Tucson/Phoenix area, Vegas area, and potentially Boise area.

Problem:  Don't know that current savings are enough to get started in the markets above.

Possible scenarios:
1.) Cash out Refinance on current property in Seattle.  Can take $100k out.  New payment all in would be $2,200/month at 3.675% interest.  Closing cost ~$8k.  Pros - $100k capital.  Cons - Maintain as a rental property that doesn't cash flow.

2.) Rate and Term Refinance current property to make more desirable from a cash flow standpoint.  New payment all in would be $1,600/month at 3.3% interest, closing cost ~$6k.  At that rate the house likely nets $300-400/month (again rental income of $2,395) depending on what you want to deduct for repairs and maintenance.  Pros - would be one of my "doors" working towards my end game. Cons - still have an issue with capital to start the BRRRR process

3.) Wait until May and sell the property to free up around $300k+ in capital.  Pros - significant amount of capital to get started.  Cons - need to have a property identified quickly to do a 1031 and not be subject to tax on the gains (likely would look to get a multi family).  Need to wait to execute.  No one knows what the market could do between now and then.

Other financing options under consideration. A) Purchase a property with a normal bank loan and rehab with cash on hand (may miss out if can't close with cash on a fixer upper?).  B) Family member who would be willing to go in on a project. C) Have a Roth IRA with $80k D) Have a 401k with $200k in it. E) Possibly Heloc on property? (options A,B, and C may be ok but D is not something I'm leaning towards at all.  E I'm not sure is an option on a rental property).

Anyway any advice or input would be greatly appreciated.  I apologize for the lengthy post but wanted to lay out all the numbers in the hopes that someone would have some good input for the "hypothetical" situation.

Thanks!