All Forum Posts by: Jason Powell

@Jay Hinrichs So the metro tax was the straw that broke your back huh? lol  There's only so much a person can get poked before going somewhere else. I've got clients in the area that went on a long vacation and came back to that metro tax, art tax, and a big property tax hike in the mail. That was their last straw before moving to Florida six months later. They own elder care facilities in the area and the minimum wage hike is killing them too.

Much agreed about the "West Coast Appreciation" being written off by many. My numbers on my first Beaverton plex were close to what you mentioned. Purchase of 415k and selling now for 740k net with marginal improvements. IRR due to the short hold time and tiny FHA down payment on that was north of 75%. Not too shabby for a dumb lucky kid starting out! But most on BP would have discouraged buying that at the time due to the rents being too low compared to purchase price.

@Jeff S. It's the "next wave" of screening rules I'm most worried about, as well as general trend. From what I can gather, landlords will not be able to decline applicants based on most criminal records, past evictions, and others as long as it was longer than 12 months ago. Personally, I feel that an applicant that was evicted 18 months ago is someone you couldn't pay me to accept. And thanks; I do consider myself a different breed of advisor. But I do feel like advisors get a bad rep amongst the real estate crowd. Fact of the matter is, the vast majority of folks out there want something 100% passive that will never cause them personal drama or time. RE is like a side business for most. I preach the owner occ FHA 4 plex to young folks, but almost nobody is interested due to the inconvenience and misaligned spousal goals.

@Mathew Wray Thanks for weighing in! I'm trying to decide which group I'm in. I avoided Portland as the path of least resistance, but now I'm being told that the "Portland rules" will be spread to all of Oregon. That was a shock to the system for sure. I have a hard time mentally processing how this will lead to much higher rents. I can obviously see rent control in NY, San Fran, etc and see they have super high rents, but I guess it's a chicken and the egg scenario; I don't know what preceeded what. I figure it may discourage rental house building...??

@Nathan Gesner  I tend to agree, and that's the way I feel. The implementation of doing that is a challenge though. I'm fearful of a 1031 exchange into a market I don't know. I hear a LOT of people regretting this decision due to the time pressure. I will have a $250k+ tax bill if I can't pull that off. Speaking of me be grumpy about Oregon, they will shave another 10% off my gain and recapture.  I am in the middle of selling one property though and just paying off my house with it (super unpopular move on BP I'm aware). That one was 25% tax free though. I guess that's my middle ground at the moment. Maybe I'll consider selling another in 2020.

Maybe I'm just going through a little grumpy fit and being melodramatic, but are any other Oregon landlords, particularly Portland area so far, getting to their breaking point yet of how far you can be pushed by political agenda and rules?

I feel like every other month I'm hearing of more policies of power being taken from landlords, statewide rent control, lack of ability to screen tenants, removing no cause terminations, etc. 

What's your tipping point before moving somewhere easier? How do you think this will affect current landlords and also your mentality on buying future rentals?

Jonathan R,

You're crushing it if you can find deals that produce 28% cash on cash "all day every day" from a 30k investment.  I dont know anyone who is performing like that. Maybe consider wholesaling these deals, as it sounds like you could add a whopper of an assignment fee to them and still have investors fighting over the deals.

Generally speaking though, there are a lot of people on BP, including myself, who used massive leverage during one of the best possible times in history to buy RE. If we copy and paste that experience into the future, our decision making will look a lot different than if we take a historical norm approach. 

I'm personally taking one chip off the table by selling a property and using that to pay off my house. However, if I could get 28% C.O.C deals, I'd cash out and sell everything other that the shirt on my back to buy into those. 

I'd agree with others that 12k is too high, but I'd personally say 5k is too low. My guess is somewhere around 8k.  There are just so many variables. I've renovated about 16  comparable units in the last 2 years, and they all vary in their difficulty. Very possible to find floor rot when you pull up certain areas of the floor, etc. Technically you need to get permits for some of this tiny electrical and plumbing work. A lot of people use handyman types under the radar to set toilets and replace water fixtures, but if you're hiring legit plumbing and electrical companies, even something as easy as swapping all the plugs, switches, and a few light fixtures will cost you $1k.

@Page Rosenlund    How much more is it worth today than what you've put into it?  I'd sell asap. Yes, you won't get top dollar, but I sure hope you've added more value than it cost you.  Maybe you can walk away with a couple bucks in hand for your work and improvement, and then move onto the next deal. You're walking a tightrope right now.

@Will Gaston   I 100% agree, and yes, that's what I'm doing. I set up a long 90 day close date to buy myself more time as well.

The heart of what I'm asking I guess is, do any successful investors out there intentionally "flip" buildings for the big, and quicker cash windfalls, with the intent of deploying into longer term rentals only when they have a nest egg of a couple million?  As compared to what seems to be more popular path of just buying a rental here and there, and using savings and/or refinance money to keep buying more. That seems like a longer haul to me, albeit much more tax efficient for the time being.....assuming one can hold or 1031 forever.

Are there any BP members here who have a strategy of simply flipping apartment buildings to build wealth, and just pay the tax as a cost of business?

As I move along my RE journey (just 5 years), I look at the deals I've done and the money I've made. The vast, vast majority of my profit as been through equity, both through appreciation and the fact I bought a good deal with instant equity. I'm in the middle of selling my 2nd deal ever (I'm still holding the others). In a perfect world, I'd 1031 into a sweet deal. However, in this market, it seems really tough to rely on that. I'm strongly considering just paying a huge tax bill and just having a bunch of cash in the bank to patiently search a new deal.

My long term goal is to have rental income that exceeds my monthly living expenses, but am I crazy for viewing "apartment flipping" and paying LT Cap gains tax as a very viable strategy? For some reason, this sits better with me than constantly sucking equity out of existing properties to scale. Perhaps this is partially due to me doubting how many people actually 1031 until they die as seems to be most people's plan. Any thoughts appreciated!

Have any small time landlords on here ever gotten their deductions taken away for failing to send a 1099, but had invoices and proof of checks cashed?

Ignorant question here, but I thought small time landlords were exempt from needing to send those, and it was for flippers, and landlords/prop managers that used RE as their business. 

Thanks for all the great responses! I think I've established that I will not do it myself, and that I will at least attempt to get a free feasibility analysis to see if it'd be worth it. Sounds like I'm on the lower range of being worth it per @Mike Dymski rule of thumb (some properties, costs plus rehab cost, of 450-700k range).