All Forum Posts by: Kathryn Morea

So regarding DST and syndications in general, it sounds like a great way to be passive but you have way less bang for the buck. If you buy a property using debt (leverage) then that 6-8% (or what-have-you) is actually way more than 6-8% because you are leveraging a larger investment. As @Mark H. Porter pointed out, the investor might be using 1031 to purchase a 6 million dollar property so a 6% return would be based on 6 million vs the actual invested amount of 750K. If the buyer really wants truly passive, that might be a way to go. But if they are trying to build wealth and want to be more aggressive, then using debt is going to accomplish far more wealth, correct? This is why I have personally steered away from this type of investment, unless it's in my 401k/IRA or something where it's basically forced on you to have a passive investment. Of course it's an option, but if you are intending to grow, wouldn't you want to use leverage? Am I missing something here?

Thank you@Mark H. Porter that's really impressive.  Certainly gives me something to think about.

@John D. This is really helpful.  I will reach out to you directly to look at possible options.  This keeps her in Cali which she prefers.

Hi Todd, Thanks so much for your reply. I appreciate you taking the time to post. I'm not sure I fully understand your suggestion. So are you saying she would purchase new construction in a vacation area (4 duplexes for example at 400K/each = 16K) and then NNN lease those back to a local operator? I'm not sure how you get to 10% or 13%. Can you explain that part? I've not seen NNN leases used with residential leases. Are there short term operators who will agree to pay NNN (including property taxes and all maintenance)? If so, this may be a good move, and give her exactly what she's seeking. And to answer your other question about if she is willing to take on more debt, the answer is maybe. She's probably willing, but the other side to that is a bank must be willing to lend. For duplex lenders, this is considered 1-4 unit residential and she would likely need to qualify similar to if buying a 2nd home. DTI will likely be a problem in qualifying for new loan(s). Whereas with a commercial purchase, like an apartment building, the property will help qualify and her personal income/DTI is not as big a factor. Some of the areas you mentioned, while resort destinations, also have their struggles with cities cracking down. (Locally Anaheim & Palm Springs are also heavily regulated, even though these are historically tourist areas). Curious if others are considering going all-in on STVR with recourse loans and then having cities ban / severely restrict Airbnb as they have in Los Angeles / Santa Monica where I currently have multiple STVRs myself. The swiftness of cities/Airbnb to enforce new laws and cancel all existing bookings leaving the property owner holding the bag is pretty shocking. This seems risky. Would anyone else care to chime in? Thanks again for the response!

@Thomas Phelan

Thank you for that well thought out response.  I absolutely agree that we need to have debt in the replacement property, not only to avoid boot but also to maximize the returns using leverage so growth is much larger.  Your post has helped open my eyes to some truly wealth building opportunities!

My client will be selling her LA area rental house and plans to 1031 into another investment. She wanted a vacation rental house within a couple hours drive, but in California, the cities are banning and severely restricting short term rentals left & right. Budget is about 1.5 million. Current debt around 500K, so she will need a new loan at least that much. Current equity about 750K. I'd love to hear BP ideas on the best place for her to 1031 into and park that money. Cash flow well over debt service is important. She is open to moving investment out of state. She works full time and can't be too involved with the project. Some thoughts are apartment building, mobile home park, NNN commercial. Being in path of growth is important (Florida, Austin, Nashville?) Reasonable property taxes and landlord laws are important as well (weary of some northeast states). I'd love to hear some ideas / advice. Thank you in advance.

Thank you Marcello, at that time, 12% was the going rate for private money, so I didn't really consider it steep.  I've both lent and borrowed at that rate.  Getting a bit less now on the lending side.

Thank you Jingru,

None of the Airbnb type links work anymore.  I added some "after" photos.  The photo u see on the post is the house when I bought it.  Here's a link to the listing that may still work.

https://www.redfin.com/CA/Culver-City/11917-Wagner-St-90230/home/6729604