All Forum Posts by: Kelly Putz

Investment Info:

Other other investment in Waterloo.

Purchase price: $205,000
Cash invested: $35,000

160 Farm that we plan to do Agri-toursim, tiny home cabins for Airbnb, retreats, weddings and other events.

What made you interested in investing in this type of deal?

Agri-tourism is a growing business model and we want to have that life for our family

How did you find this deal and how did you negotiate it?

Searched online for 7 years for properties in Tennessee when this one popped up at the bottom of our search page. It met all our our criteria (except being in Alabama) and the price, taxes and location were right.

How did you finance this deal?

Farm South Credit Bank with 20% down in 2 separate loans, as there was equipment that came with the farm that could not be put into a mortgage.

How did you add value to the deal?

We will be converting the 7 treehouse style permanent deer stands into larger tree houses for Airbnb as well as building other structures, planting a fruit orchard, growing cash crops, hosting retreats and educational events as well as building a wedding venue and many other plans we have in store.

What was the outcome?

Will keep you posted once we get moved and get started!

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Nope! The listing agent created problems with a neighbor, which could have easily been avoided had he been honest, that we are still having to deal with and will probably have to get an attorney involved.

@Luke Klaiber Hi Luke, I read through Amanda's article and it doesn't mention anything about requiring an investment in improvements on the property purchased. And there's no mention of it, that I can find, on the IRS website.

@Scott Krone Can you put up a link to these guidelines? i went through the IRS site and didn't seen anything regarding this, only:

To qualify for deferral:

• capital gains must be invested in a qualified opportunity fund (QOF) within 180 days
• the fund must hold at least 90 percent of its assets in qualified opportunity zone property
• investment in the QOF must be an equity interest, not a debt interest

@Scott Krone - Hi Scott, so if my husband and I are buying a property in an OZ for $625,000, that is already 100% occupied by renters and essentially does not need any work done to it, are you saying we need to put $312,500 into it for the IRS qualification???

Hi Shadonna,

According the CPAs I spoke to, and the IRS FAQ page, the LLC must be a partnership, not an individually owned one. So you may want to get a friend or colleague to go in with you, or find a fund to invest in.

A partnership LLC is simply an LLC that has more than one member/owner.

10 years as a Realtor and there is still so much to learn! As a member of my local Economic Development Council, I recently started learning about Opportunity Zones. It was a little hard to grasp at first, but after attending a few seminars and talking with a trusted CPA I think I finally have a handle on it.

If you don't know what they are, Google them and you'll get maps and all kinds of web sites of investment companies and financial advisors telling you about joining a fund to invest in them, but it's much simpler than that. Here is a link to the IRS site with some informative FAQs.

https://www.irs.gov/newsroom/opportunity-zones-frequently-asked-questions

In a nutshell, Opportunity Zones were created in all 50 states, DC and the U.S. territories to generate economic growth in rural and lower income areas, both commercial and residential, by encouraging investment in those areas. Investing in an Opportunity Zone allows an investor to reduce, or completely erase, federal capital gains tax on the sale of a property, stocks, etc. depending on how long the purchased property is held. It's a little similar to a 1031 exchange, but there's no intermediary needed and no escrow that has to be set up. In a 1031 exchange, you can only defer the tax, but if you hold an Opportunity Zone investment for at least 10 years, the tax is erased AND so is any capital gains on the appreciated value of the property when it is eventually sold. You only have to make the purchase or investment within 180 days of creating the capital gains event under an S-Corp or partnership LLC, and you self-certify with the IRS when filing your taxes. If you sold a property or stock in 2018 and bought a hold property, so long as it's in a partnership LLC or and S-Corp, it's worth it to check and see if that property is in an Opportunity Zone, because you can also refile your taxes to take advantage.

My husband and I had been looking at a large buy and hold property and knew we needed to sell one of our first investment properties to have the down and closing, but when we discovered it was in an Opportunity Zone that made our minds up because we could avoid the considerable federal capital gains tax that was going to be created by the sale of our smaller property. What's MORE is that the property we are selling is ALSO in an Opportunity Zone, so the new buyer gets to take advantage of that. Because of this, we are now planning to sell a second property to invest in a TBD Opportunity Zone property. Maybe we'll buy a small hotel in Puerto Rico? The entire island is a designated Opportunity Zone!

So now, I also have a way to convince owners of vacant buildings in our local downtown area (who have only been hanging onto these empty buildings as a tax write off, to the city leaders' eternal frustration) to sell their Opportunity Zone properties and allow for more economic growth in town, then reinvest their proceeds in another Opportunity Zone property, so they can create economic growth there, as well as take advantage of the tax reduction or erasure.

Great post! I bought my FIRST deal in Greenbelt, MD in 2012 for only $35,000. It paid for itself in only 3 years and now it's worth $120,000 and still cashflows nearly $1,000/month. I'm planning to hang onto it for a while longer, but I'm considering trying to take some equity out to leverage on other properties. Unfortunately, I titled it in an LLC and it's a condo, so I have not found a bank yet willing to give me a commercial mortgage on it. I learned a lot with that one, especially about vetting my tenants better. The first one, who worked for Homeland Security!, trashed the place and I had to renovate after he moved out.

My LAST purchase, only a year ago, I'm seriously considering selling parts of, LOL. It's in my hometown, Tupelo, MS, and the previous two owners hardly did any maintenance in the last 10 years. It's 10 units - 4 houses, a duplex and a quad - on 2 acres that, for some reason, was never subdivided so we got hit with a HUGE tax bill surprise in January. We inherited some shady tenants that our property manager has gotten rid of and done a LOT of work to move in better tenants, but, on top of needing to be subdivided, it is currently nickel and diming us to death, plus we need two new roofs and all of the central AC units need to be replaced soon. It was only half rented when we bought it, and we are now at only 2 vacancies - including one last unit that needs to be gutted - so money is starting to come in, it's just been an ordeal and a half. But we've learned a LOT about larger multi-family properties.

If only I could pull some equity out of my first property and sink it into my last property to get it cashflowing better, lol.

Also, you can own in your name and manage through an LLC set up just for management. The LLC management would bear responsibility of lawsuits. Not ALL, but a large portion. This can also vary from state to state. So, get lots of insurance too!

I also recently learned a COSTLY lesson regarding LLCs set up out-of-state to own properties. We purchased our first investment property in Maryland four years ago with an LLC that we set up in Nevada, because all those investment seminars tell you "CREATE YOUR LLC IN NEVADA!!" to keep from "piercing the corporate veil". Well, what they failed to tell us is that, in some states, like Maryland, if you own a property through an out-of-state entity, and you sell or transfer that property out of that LLC, it triggers a special TAX. In Maryland it is 8.25% of the sales price/property value!!! That's even if you are just quit-claiming it out of the LLC. If you're selling it, that tax gets taken out of an profit you may have had.

The more and more I get into property investment, the more I listen to my brother-in-law. He owns 75 properties in and around Nashville, and I recently learned that he owns them all in his PERSONAL NAME. No LLCs, no S-Corps, no separation. He buys lots of insurance and personally manages his properties as his full-time job with a small crew of repair guys. His tenants know him because he collects the rent himself. In 36 years, he has never had a lawsuit and has had very few evictions. And most of his properties are in bad neighborhoods - still, how bad can a neighborhood be in Nashville? LOL He put their 3 kids through college, 1 through med school, 1 through engineering school, buying houses for all 3 kids instead of paying for them to live in dorms or rent apartments. He recently paid cash for a farm to help his eldest son (the doctor) and his family build a family compound, complete with grass airstrip to land the family plane. I want to be him when I grow up!!!

You can only transfer ownership into a Trust. Federal lending laws prevent mortgages from being transferred to anything else, but a Trust. You can purchase properties under your name, which I highly recommend, as it will be much costlier to purchase under an LLC, or a Trust for that matter. Then once you're all settled, you can transfer it into a Trust. Consult with your real estate and/or estate attorney on timng and how best to go about this.

I've recently bought clients a Roku 3 (for family of 4), a Roku stick for a 2nd home condo purchase, and a Keurig for a client who is a coffee nut and didn't have one already. The family I bought the Roku 3 for said it's the best gift anyone has ever given them.