All Forum Posts by: Leslie Pappas

Quote from @Britney Ross:

Okay, so I made a sizable amount of profit on the sale of my airbnb property and made my best attempt to identify and close on another piece of like real estate but unfortunately, it looks like that deal may fall through because the owners now want to keep it.

Should I:

A) put the money into a Deleware State Trust (yes I did identify 2 on my 1031 as options under the 200% rule). The money would be in a large, high end nursing home in VA and Student Housing in Washington, up to a 10 year hold, looking at about 5-6% quarterly return and maybe 1.5x return at sale BUT illiquid and commercial real estate is tanking so higher risk here. Avoiding taxes is the best benefit then 1031 out of this in a few years.

B) Pull my money out, call it a loss, pay a sizeable tax bill and put the money into another investment

Appreciate any insight here, especially from those with experience in DSTs!!

Hi Britney, did you decide on the DST? How'd it go?

Quote from @Shaheen Ahmed:

Is Baltimore a good place to invest in multi family? I’m a new member and thinking about getting in to multi fam investment properties. I am in Los Angeles area and SoCal is way out my reach. Thanks in advance. 

Hi Shaheen, there plenty of other opportunities out there, my clients are involved in institutional grade properties across the country. My recommendation is to choose cities in safe and economically diversified areas with above-average income and population growth. It can also be safer to diversify your investment properties across the country. There is still good money to be made in AZ, FL, GA, TX and other states, however, picking the right submarkets is key.

A very good source of local analysis is rereport.com

Quote from @Brittany Farrell:

I should also mention that we are currently living in California, but we do not own a home and I’m very uncertain if we will stay here. We have vaccine hesitances, and doubt we will be able to put our children in public school in the state. We’re open to Oregon, Idaho, Colorado and Montana. Buying a duplex to offset a our mortgage so we have a home base somewhere may be another possibility.

My baby needs me.. so I need this income! Any advice/input is warmly welcomed. Thank you so much :) 

Hi Brittany, there plenty of other opportunities elsewhere, my clients are involved in institutional grade properties across the country. My recommendation is to choose cities in safe and economically diversified areas with above-average income and population growth. It can also be safer to diversify your investment properties across the country. There is still good money to be made in AZ, FL, GA, TX and other states, however, picking the right submarkets is key.

A very good source of local analysis is rereport.com

Quote from @Bob B.:

5) I could 1031 into some DSTs, but that seems like I have to figure out the correct ones or rely on companies like Kay or Income Property Advisors or such who tell me there is just a small commission and the DST advantage over 721s which I will speak to next is you can pick the correct one. But they don't really want to speak about the commissions and fees involved or say the returns overcome it. They also talk about how it can do the return I want, but there is I guess minimal possibility for backend appreciation and I am looking at trying to figure out new DSTs ever 4 to 8 years? I am not sure that is super appealing.

So I don't know if you have some suggestions of advisors you feel shoot straight (maybe you will say some of the ones above), recommendations, suggestions, or what have you will be greatly appreciated.

Thanks,

Bob

Hi Bob, with DSTs, some investors like the hands-off nature that allows them the option to diversify into institutional grade real estate and multiple markets across the country.
I specialize in the DST world, feel free to check out my blog, I'm happy to answer any questions or provide some more information.

https://www.biggerpockets.com/member-blogs/7993-cashingin-tax-free-1031-exchange-and-dsts

Quote from @Andrew Fuery:

Hi There,

We just sold a property and are looking to do a 1031 Exchange. We have about $1,000,000 cash to put into a deal and are looking for a 75% LTV. If you have any good properties that fit this criteria, please let me know.

Thanks,

Andrew Fuery

Hi Andrew, there are Zero Coupon options in the institutional grade DST (Delaware Statutory Trust) space for that high of an LTV but they won't be cash flowing. Happy to help answer any other questions.

Quote from @Amanda Black:

Hi all. I live in San Diego, CA where everything is expensive. I want to start investing in real estate, so I put an offer in on a 1/1 condo that I could afford (awesome location, good size, needs some aesthetic upgrades). I met with an investor today and he said I am on the slowest, worst road to owning more property quickly. He advised me to go find a multi-family home and explained all the reasons why. I can not afford anything like that in California, so I was looking in Ohio (where I have some family) instead where it is affordable. It looks like I could maybe break even or be a little under each month going this route. I don't want to buy something just to own my own home, I want to buy something to eventually make money and buy more properties. But buying in a state I don't want to be in also seems scary/risky. I would buy in Ohio and rent in San Diego. 

What are you thoughts? I know I didn't ask anything very specific, but I would like to hear your experiences especially if your first property was somewhere far away. 

Hi Amanda, welcome to BP! Prices in SD are still going up, but at a lower rate so yes it makes sense to take your money to a different market. There plenty of other opportunities elsewhere, my clients are involved in institutional grade properties across the country. My recommendation is to choose cities in safe and economically diversified areas with above-average income and population growth. It can also be safer to diversify your investment properties across the country. There is still good money to be made in AZ, FL, GA, TX and other states, however, picking the right submarkets is key.

A very good source of local analysis is rereport.com

I've lived in Silicon Valley, and I'm an investment advisor who specializes in real estate. I can tell you what people here have done to set themselves up for retirement. There are two types of investors here:

1. Buy or inherit and hold for a long time, then cash out and redeploy equity into potentially higher cash flowing properties or other investments.

2. Buy or inherit and hold all their lives while working the properties for income.

I've seen teachers, firemen, software engineers and all sorts of people utilize both strategies successfully. One way or another, however, the investors must work to pay down loans, increase rents and decrease expenses wherever possible. One way or another, they are building their net worth.

Building net worth is how you may possibly retire with fewer worries. If your retirement utterly depends on having adequate cash flow from your properties, any downturns will cripple you. AND you must maintain adequate reserves to take care of the disasters that may happen.

Most of my clients fall into the first group above. So my advice- build your equity.

Hi Jonah,, there plenty of other opportunities elsewhere, my clients are involved in institutional grade properties across the country. My recommendation is to choose cities in safe and economically diversified areas with above-average income and population growth. It can also be safer to diversify your investment properties across the country.

A very good source of local analysis, rereport.com.

Quote from @Carlos Ptriawan:

Quote from @Amanda Black:

I am trying to break into real estate investing with my first purchase. I live in San Diego, California, and buying something to rent it out doesn't seem like a cash positive or even break even option. 

If I live in it a couple years, will this eventually change?

Or to make money, do I move to a city where this isn't the case?

Thank you so much for any advice!

 in city like san diego you make money thru flips and appreciation.

I am selling my out of state to re-invest in bay area lol ;-) there're lot of opportunities actually but it requires lot of skillsets and actual high number of capital investment.

The Bay Area can be a fantastic place to invest if you have the capital. As you know, whenever you invest here, you must be prepared for your investment being entirely correlated to the tech industry. Best of luck to you.

Quote from @Becca F.:

I currently have 3 SFH rentals solely owned (1 in San Francisco Bay Area and 2 in Indianapolis metro area) and 1 apartment building in the Bay Area with co-investors). I have a lot of equity in the Bay Area house and the apartment building. SFH is currently negative cash flow because I'm renting out to family members, trying to get roommates in to bring it up to market rent. The apartment building cash flows the most out of all the properties.

Indy SFH#1 in Class A nice suburb with great schools has appreciated in 10 years (doubled in value) that I've owned it. However my cash flow has decreased from $400 a month (in 2019) to now $110 a month in January 2023 due to property tax increases. It's really $66 if you divide the annual HOA fee into monthly amounts. House was built in 2005 so haven't had too many expenses recently (replaced water heater 2017 and HVAC 2018), but it will need a new roof in a few years, I would guess.

Indy SFH#2 is a renovated home (built in 1920) bought 7 months ago in a Class C moving up to B area. It's supposed to cash flow $176 but I have only received 1 full month rent (minus the property management fee) due to repairs that tenant has called the PM company for. I'm in escrow on Indy SFH#3 - projected cash flow is negative - $100 or so with these interest rates. Hopefully I can raise the rent over the next few years.

Since these cash flow amounts are small, they would be wiped out by a major capital expense for the year. I have reserves but I feel like I have too much in real estate and should take a break and invest in more liquid forms (stocks and index funds). My net worth in RE is well over 50% (don't want to go into specific numbers on a public forum). I've heard different investors have net worth range from 20% to 98% in RE.  My goal is to leave stressful W2 job within 5 years or scale down to working on part-time/contract basis. I feel like I'm starting to over leverage or take on too much risk. Is that part of the definition of over leverage, with rents barely covering my monthly expenses? 

Also there's the headache factor with investing out of state especially older homes. My thoughts were to in the near future possibly sell the Indiana properties because of the ever increasing property taxes, 2.77% and 2.78% tax rate and 1031 to a SFH in a less expensive part of Northern California (90 min drive). Nevada or Arizona have much lower property taxes and better appreciation but I would be cash flow negative with those also (as long term rentals) and again it's out of state. Or just sell them and take the capital gains hit but then I lose the rental income and tax write offs.

 Am I missing something but how am I going to leave my W2 job or go part-time if I'm barely cash flowing especially on these Indiana properties? Even if I bought 10 more Indy properties all my net rental income won't add up to my W2 income (after taxes). I do my own taxes so I can see my taxable income reduced every time I add a property into the tax return form. They're passive losses but I'm tracking my hours to see if I qualify for Real Estate Professional Status. This RE investing combined with a W2 job is stressing me out. Thoughts?

Sorry for the essay but I'm frustrated. 

Hi Becca, great post and love the way you're thinking. I've helped many real estate investors move their money out of California. There plenty of other opportunities elsewhere, my clients are involved in institutional grade properties across the country. My recommendation is to choose cities in safe and economically diversified areas with above-average income and population growth. It can also be safer to diversify your investment properties across the country. I can't speak specifically to the Indy markets but there is still good money to be made in AZ, FL, GA, TX and other states, however, picking the right submarkets is key.

A very good source of local analysis is rereport.com