All Forum Posts by: Kevin Brenner

@Paul Caputo awesome insight! Between the trust that you mentioned and the NNN lease option that @Dave Foster mentioned there are certainly some options.  At the moment, I'm not interested (nor do I have the capacity) to purchase all of the properties.  I'm looking more at one or two of the older MFH commercial properties.  Also shout out to @Ronald Starusnak for his input regarding the deduction of losses from his tax bill.  Given the current market in my area, there is a real chance that some of these properties in his portfolio may appraise high due to their location.   If he sell's low, he can take advantage of the Tax Loss Harvesting strategy and still walk away with a significant amount of take home cash.  

Thank you for your inputs everyone! 

@Dave Foster thanks for your reply!  This is all really great information.  I wasn't aware about depreciation recapture.  He's owned these properties since the late 80's to early 90's so I'm assuming that they have been paid off for some time now (but who knows, he could have been pulling equity out on them with refis and/or HELOCs).  

I'll need to do some research on NNN lease options. Interesting point you made about partnering up on a holding company and then leasing the properties to me with an option to purchase. I'm assuming the option would come into play in the operating agreement and kind of be like a balloon payment at the end of a loan term? But, like I said, I need to do more research on the subject.

Appreciate the response! 

@Jake K. I just started spending about 20 minutes a day looking at the MLS after work. When I find deals that are interesting I run the numbers and check them out. If they are good I text the address to my agent and he sets up the showing. If not, I move on. This particular deal was on the market for almost a year. Come to find out it was on and off 3 different contracts over that time and was depenedent on other investors selling and 1031ing up. The VA worked for me cause I didn't have to come to the table with $70K. But if you dont have a VA, an FHA would work. I still look at the MLS. I'm working on cold calling folks and direct mail marketing now though. I'm also networking with wholesalers at REI meetups. It's always better to have the deals find you!

@Aaron Klatt true true. I'm going to take him to lunch and talk it out.

@Aaron Klatt my initial thought based on our initial conversation is that he is quite old and looking to exit the game for good. But yea I will definitely mention that to him. Appreciate your input 👍

Looking for some BP tax experts/investors on this one:  

I was cold calling potential sellers the other day and talked to an older gentleman who owns over 25 properties in my area.  He has considered selling in the past, but doesn't want to get stuck with all the capital gains taxes.  I mentioned how he could avoid some of the tax through seller financing. 

I understand that with a long note, the payments would be relatively small, which would greatly reduce the taxes for the seller by limiting his exposure per year.  Are there any other tax benefits that I'm not aware of (from the seller's perspective)?  Generally speaking, what terms do you think I should present to him? 

@Patrick Jameson Cunningham Thanks bud.  I think I'm still a little bit from true "success" on this deal, but I got a good thing going on.  I'm looking forward to the rehab.  Did you move to FL yet? 

A little less than two weeks ago I secured my first deal and it was a BIG one. Prior to May of 2018, I knew literally NOTHING about REI. That didn't stop me from closing on a 4-Plex (Quad) in Savannah, GA about 5 minutes from my current apartment (it can be done, trust me)! I owe this all to the BP community for providing me a forum to educate myself and network with other like minded individuals. In the spirit of the Podcast's "Deep Dive," I figured I would go ahead and provide a Deep Dive of my own for anyone who has read this far into my post :)

Type: 4-Plex - Savannah, GA 

Units: 4 (2BR/1.5BA, 1200 sq ft Apartments) 

Price: $350,000 

Current Appraisal: $395,000 :) Equity :)

Rehab Estimate: $30,000

ARV Estimate: $460,000

Current Rent Roll: $2950

Projected Rent Roll: $4500

Cash to Close: $2,400 :) :) :) 

So here goes - I found this property by just searching the MLS (mainly Trulia and Zillow). I already had an agent who was referred to me by a friend that specializes in REI clients. I visited the property, spoke with the owner (by chance) and went home to run the numbers (thanks to BP's calculators). After working out the numbers I realized this is a perfect BRRR opportunity! The property was owned by a sweet old lady who had owned it for over 30 years. She was just tired of playing Landlord and wanted to move on to something else. I tried to work out seller financing, but she had already refi'd twice and needed to pay down her loans.

I was able to fund the deal using my VA entitlement (which tops out at 4 units). Also, I ran a market analysis and learned that the current owner was charging half of what she should have been charging in rent. Suffice to say, the property was 100% occupied! Plus, she put on a brand new roof and updated all the HVAC within the last 5 years! Although it was built in 1958, the bones on this Quad were solid and the risk of any major capex was quite low (knock on wood).

So now I'm in the process of applying some much needed TLC.  Last week I had the "swamp" in the backyard graded and turned into a concrete parking pad for much needed offstreet parking.  I also have contractors coming in to provide some much needed exterior updates.  Once the tenants start turning over, I plan to update their bathrooms and pull them out of 1958 and into the 21st century which should definitely add some value to the building.  All in all, I'm projecting approximately $3,000 in rehab per unit ($12,000) plus $6,500 in exterior work plus $5,000 to update the electrical with a $3,000 contingency reserve and a $2,000 management reserve - about $30,000 total.  

In summary, I closed on this Quad with $2,400 cash with 100% LTV (Thank you VA). I will put about $30,000 into it while raising the rents to market value. By May 2019, I expect the building to be 100% rehabbed earning an NOI of $55,200 with a Cash Flow of about $1,600 per month (after PITI, Vacancy, CAPEX, etc.) and a CoC Return of 57%!

You show me how to do that in the stock market and I'll quit my job to be a day trader. By the looks of it, I think I'm gonna stick with REI though :)

Thank you BP for all of your insightful knowledge and showing me the path towards financial freedom!  Maybe I'll be on your Podcast some day (give me like 5-7 years haha)!  On to the next MFH deal :)  

Chris,

I'm interested.  Please PM me your contact information.  I'm local to Savannah and would love to learn more.  Thanks. 

Kevin Brenner 

@Raymond Northcutt I'm still working it all out. I was able to find a local state farm rep who will write a policy for me with the fuses intact (which is great). I havent decided if I should just update the electrical for resale purposes, or just roll with the state farm rep amd save the $5K. I may still be able to work some of those costs into the front end of the deal too.