All Forum Posts by: Christian Hutchinson

@Llewelyn A.

Thats all true but even a McDonalds produces a 6-8% return on cash at min. 

Also, NYC is an international market.  20-25 years ago Brooklyn wasn't the hottest RE market in the world. I would bet banks were not offering traditional or prime financing on places you were purchasing in Brooklyn. Lastly, its one thing as you discussed to double your money in 10 years where market trends be predicted, with an extra strategy versus 30 years what this person is suggesting.

The $2M deal in BK you are talking about makes sense because its 3 units for what $9K a month in rent at least. That may be enough to service the debt/taxes etc plus you get rent increases of significance in Year 3+.

@Stuart M.

An asset is only worth what someone is willing to pay. Its bad business to bet on the asset liquidation to realize profit.  Cost structures can change (property tax increases, insurance cost).  Rents can go down, and higher end properties have large price swings for rents and homes in bedroom communities are harder to rent while school is in session. Even worse any future lending done will view the property as a dead asset aka liability. Because your money is tied up, but it produces nothing yearly in terms of cash, so it will hurt you. I have a couple of high value assets lenders like that because its lets them know you have some cushion if something happens, but cash is MUCH more reliable than values.

Option #2 makes no sense to any investor:

I am going to park $500K into an asset that gives me nothing in return.  So in 30 years It wont even double in value. Meanwhile, things, break, you have vacancy, etc.  Lastly, in 30 years the property won't be worth that much unless improvements are done (roof, furnaces, kitchen, upgrades, etc). There is a real opportunity cost in doing this "mythical" investment and ongoing costs. You might as well buy gold bars, silver, and wheat)

You consider even less effort can be placed in the an Index Fund for the S&P, Dow, Nasdaq, Muni Bonds, Heck even a Money Market Fund, and my money would be liquid, and gain way more money.  I could buy a Life Insurance Policy that could quadruple in value in that same time frame, and becomes liquid in 10 years. Thats passive investing.

Or I could become an active investor in a management group and buy a franchise. If Option #2 was for 4x-6X increase that is different also I'd take that bet (like a new transit point is being built and this property is near it). To consider the stock market will double every 10 years historically its a much easier investment.

Now if your argument was buying 20 acres of woodlands on undeveloped land on the edge of town thats a different ball game.

@Joe Splitrock

You understand they got rid of the personal exemption and dependent exemptions, so the child tax credit was just a swap threw a in a couple hundred dollars on top.  Based on the advice on my accountant at best we will receive an extra $1700 a year.

Thats nothing, thats not even an extra paycheck for myself or wife. Thats $50/mo increase in rent on three units. which again is nothing. If your employer offered you a 2% raise would you think you broke the bank, would you say your situation just improved?
Basically we can "book" more profit from our rentals. We writeoff a few less meals, we deduct a few less trips to our properties.

I don't believe for a second my employer will up profit-sharing, 401K matches, or give us a pay bump (like 10%) of any significance that I couldn't double switching employers outright. Hopefully I'm wrong, maybe companies will pump up their dividends so cash will come all sorts of ways via a little pay, asset values, stock values, and decreased tax burden.  Maybe this is 3-4 revenue increases and expense optimizations  thats gets me $10K more a year just doing what I'm doing, we shall know in about 18 months though.

Is it a SFH or MF? Like I said it could be worth it. Like if its a 4-20 unit building near Clark Park, rents are nice building is cheap...From a pure numbers stand point. Maybe you can get the property and switch managemenr? idk its all negotiable sometimes.

 Why would you do business with COTS? They are a non-profit that provides housing to homeless families, or women with kids from domestic violence situations.  Where is this property located? Depending on where you would be better off with a market rate renter.  COTS is very powerful, if you had an issue with the tenant, you would be going against a Civic Non-Profit with an unlimited checkbook, and the issue of kicking potentially abused women and children out on the street. Unless they are paying 30% over market-value this sounds like a potential headache.

COTS HQ and shelter is right outside Downtown and near one of my properties.  I know the people using their services havent been too bad historically, but another shelter nearby is pretty bad.

I guess what the purchase price, and rents, combined with location.  I know COTS is upgrading their main shelter so they are moving people to other houses for a couple years while the renovations are completed.

@Jack Clough

SALT deductions allowed people in high income States to KEEP more of their tax dollars, because the money was being taxed at other levels.  Thats what the purposes was. Now only being able to keep $10K "high" earners in high income states and Metro Areas end up sending even more money to DC. Then you breakdown by State where this money is going and its quite obvious how was it crafted.

How does it level the playing field? The coffers just got filled with more money from their better off cousins.  I've been watching what people's opinions are on FB, Fox News, Breibart, Washington Post, etc. People in these Jurisdictions really have no clue what the cost of living is. People really think people making $155K a year are living high on the hog.

More money is sent in from these States even WITH uncapped SALT deductions, look at the Donor/Receiver Analysis by State. This does not encourage these low-earning States to "raise the Tax levels" in their State.  It does the exact opposite. Now, does it encourage high income States to lower its tax structures yes. But this is very difficult to do because many of these high income States have legacy costs from Pensions and Healthcare, and probably have lots collective bargaining units within the Govt, so it would be difficult to lower their pay structures just because of that.  Also, you have the problem of how would local Govt get a County Administrator of any skill paying $47K a year when a comparable position in the private sector pays $85K.

Plus, my home State has 4% flat tax, you cant go too much lower. My property taxes are a little high, there is room for improvement. Thats due to living next to a City (Detroit) that outnumbers the rest of the county 2:1 person wise, and raising taxes on any County issue is the 1st, 2nd, and 3rd option. However, how many "smaller markets" could I find the job I have in Technology, or my Wife could find multiple places of employment in Healthcare?

First chart was the Atlantic in 2014, it does return on dollars.

This is Wallet Hub's 2017 Analysis (Tax Foundation did one too mirrors it basically), they lower the number the more dollars received.

This is naked theft from high income States who DEPEND on private sector dollars to subsidize States who basically are propped up by Federal Monies via grants, payments, defense, national security, and Govt Contracts.

 Do people just spend reckless on bond votes, yes they do, because $50 to $100 seems small until its like 6 or 7 things. We have nice schools, private parks, our youth sports leagues are ran via the City or Spun-off non-profit the City sends a check to. WHY do communities like this do it. Because people are invested in the community and think long term about stuff. During a the last recession places where I have rentals go rid of stuff like libraries, community education/enrichment. So to save a buck people cut stuff that is a long-term investment. We had a team in the LLWS 2 of the last 4 years. It cost $120 to play baseball in my town for 4 months, soccer is  $150, or $250 if you play both seasons. Swim lessons for my kids is $60 for 8 weeks. People with college educations and six figure incomes understand the importance of hard-copy text.

Or hey we dont like what we get charged for the Regional Water System, instead of complaining saying we are being robbed, we passed a bond to build our own system to run as we wish. Court system is too complex and cumbersome, fine, we standup our own system with fee structure. A traffic ticket is handled through the mail versus traffic court which nothing but a money grab.

Communities that are affluent and been that way for 100 years approach problems way different than just places that are nice now because a developer built some new houses.

What this SALT tax is doing is basically making high-income States in the MW, Northeast, and West support lower income States even more in the Southeast and Southwest. All while these States biggest industries outside of GA and FL being Defense and National Security related industries.

Go look at who Donor and Receiver States are in terms of Federal Monies.

The SALT tax is a big middle-finger to people on the Coast, and Upper MW who live in Urban Areas (Chicago, MSP, Detroit, CLE, PITT, INDY).  Your average family of 4-5 has two income earners with a college education or a nice Union Job. They live in suburbs with nice school districts and homes cost $250-$600K their property tax bills are $4k-$15K a year. These people are not rich, they make $125K-$225K a year. They have state taxes of $3k-$10K a year, and some cases have local taxes thats $1K-$4K.

If your property values keep going up its like a double whammy, because every dollar over $10k is federally taxed, while more of your income is being taxed because of assessments.

loveland technologies, they are pretty good, and its free.

You can also look up information on the city of detroit property tax information site.  cost $2 per inquiry, or register an email and "claim" the property. As long as no other email claims they are the owner, you get a free lookup.

@Joe Silva

Okay, so in Jefferson-Chalmers you bought a duplex for $57K.  IDK the condition of the property but $80K sounds pretty steep, as most of the homes are in decent shape over there.  I know those places are fairly large 3000-4000 sq ft and if your just going to gut the whole thing (windows, HVAC, and all) I could see the price.

All that being said, I have a difficult time understanding the $900 or $1000/mo price tag per unit.  Units in GPP don't fetch for that much right on the other side of Alter, and they have great schools, parks, police services, road services, etc, 2 bedrooms fetch for $800-$900 over there and are about 700-900 sq ft.

I get the units maybe are 1500 sq ft each. So your market is someone who doesn't need schools, who was considering the eastside of Alter, but you charge them an equal price for an extra bedroom and double the sq footage.

IF you can get the $1800/mo this investment looks much better in year 3 or 5 versus 18 months from now, because rents would be at $2000-$2400/mo by then.