All Forum Posts by: Joel Brown

I have a friend that called me yesterday. He was looking for advise. He has been watching me purchase and rent properties and he wants to get in the game. He makes decent money (He is a part time college student and works managing a company that sells over the summer) He has told me in the past that he will make $40-60K over the summer. Most is 1099 income and his accountant somehow shows a very small income with all his write offs. At any rate he has tried two banks and 1 lending agency and was turned down by all. His parents think he will loose money in real estate so no cosign with them. 

He found this FSBO in the Provo/Orem/ Lehi area which according to most of the reports is growing leaps and bounds and has tons of the tech and future jobs so the location is great. He plans to live in it and rent to some of his college friends. It has a separate basement entrance as well that he would rent to a couple/small family .

I think it has potential. I'm asking your help on creative options that he could purchase and use the property as and investment to get him started in the real estate investing game.

@John Krasner I think that would make your mobile home park way more attractive to renters. Some parks wont need one because they maybe the only option anyways, but the cost of a pool divided by 100-150 lots makes it cheap and even getting an extra $25-50/month would pay for it less than 2 years.

Yes, it would be what we investors call a tax shelter. If it’s residential (condo?) then you can depreciate the house (but not the land) over 27.5 years. For example if he paid 325k and the land is worth 50k he could depreciate $275k over 27.5 years or $10k/ year. If he held from January he would have $10k depreciation expense plus any of his deductible expenses. Many of the improvements would also be losses but most need to be expended over the life of the improvement. So hopefully he needs these “losses” to offset income from 2017. This is my understanding do don’t forget to seek advise from your cpa. I’m sure others will chime in to correct any of my misconceptions. Real estate is awesome because it helps cut the bill from the taxman!

I’m not sure in a flip it makes sense unless it is in a neighborhood where every other house had one. In warm climates away from the ocean I’ve done great with pools for buy and hold. My experience is you has 3-4 times as many renter inquiries in my pool houses. You will get 20% more rent with a pool and I have economical pool help that gives me a better cash flow. Of course somebody else put the pool in and took the hit on the lack of payback. I look for pools in my purchases if I get them at a big discount.

Here is the current list for SLC county.

 http://slco.org/uploadedFiles/depot/fHealth/progra...  

Homes decontaminated are removed from this list (and are the only ones you can be reasonable sure are not contaminated). My home was larger than 3000 sq ft in a nice neighborhood and has a large in-ground pool, hot tub and kiddie pool. You would be amazed at where Meth happens. Fortunately mine was a user home and not likely a manufacturing house.

http://slco.org/uploadedFiles/depot/fHealth/programs/housing/ccp_list.pdf

I had 2 clean up agencies give a bid as well as the property inspector, they seem to collaborate that 80% in Utah was what they are seeing come back (testing higher than the legal limit that the health department/State of Utah says is inconsequential amount in the house (0.1 µg/100cm²)). Those sent for testing were much higher percentage positive (as they were the ones suspected) but over all about 80%. Much higher in SLC, little lower in Southern Utah, much lower in Provo/ Orem/ Lehi areas.

I’m learning! I found out about Meth in due diligence. I should have reduced it more with an additional addendum. I did get an extra $7.5k ( in addition to flooring and other concessions) to cover my hard decontamination bid of $7495. I wasn’t anticipating the trouble getting her out as I did save $80k equity for her by her avoiding foreclosure. 

I learned the lesson as just today I'm paying the price. Great property but tested positive for Meth (as 80% of Utah rentals unfortunately do) and the decontamination team is there helping them move out because I couldn't get them out. So instead of paying to decontaminate I'm on the hook for them being moving guys. I should have just evicted (even though they never rented from me they just didn't move after I bought their house (and saved their equity as the foreclosure date was looming 3 weeks after we closed!). If I evict they never get a rental. I was nice so now it cost me at least  $2K.  I got a deal but not as good as I should have.  

My mistake maybe will save some of you from being as dumb as me. Sometime being nice cost you, but I still want to do right by everyone I meet so I'm sure this won't be the last time. I expect to come out ahead at some point!

I just purchased a pre foreclosure. we closed bout 3 weeks before the foreclosure. If you get a hold of the bank with the mortgage and they know their is a deal/offer they will either accept or not cooperate. I still have the previous owner in the house looking for a place to rent so It can be messy so you need to get it at a significant discount to make it worth your while. If the bank cooperates it might be worth it, if not you might run out of time. I'm certainly not an expert so take my experience as just a single episode not a system.

My accountant informed me that if I hold my rental in an LLC, and I 1031 exchange it and I die there is no step up in basis. I would have to hold it personally for my family to get that tax forgiveness. Any other downsides to holding real estate in an LLC?