All Forum Posts by: Manas M.

@John Vietmeyer Have you found answer to your question? I am in a similar situation with my own OZ found and trying to understand how can I even take regular depreciation to shield  rental income?

Please let me know if you found some resources on it.

@Chris Montgomery  Could you please share your thoughts on my question here as well?

https://www.biggerpockets.com/...

> Are you saying that certain partners do not have any basis in the partnership?

This is what my understanding is. From IRS publication here,

" Under section 1400Z-2(b)(2)(B)(i), an electing taxpayer’s initial basis in a
qualifying investment is zero."

I think the rationale behind this is because partners are transferring their capital gains to the LLC (to defer capital gains). Because of zero basis, when they sell their share in LLC they would realize an equivalent capital gain (of the same nature, long or short, as they contributed initially).

Also, I think your point on "at-risk" value is valid. I looked into publications but I can't find what would be "at-risk" value in this case (should be the total initial investment logically speaking). 

To complete the thread, I stuck with the property and ended up with a great tenant. I realize I may not have given enough information above but all the comments were pretty helpful in letting me chart out various scenarios.

Hello BP folks,

Can anyone help me understand how to handle depreciation for real estate properties held in an opportunity zone fund? As per my understanding, the external basis of the partner in the fund is zero (assuming no other debt) at the time of fund setup. Now, if every year we take out distribution equal to the net rental income, it would keep the basis to zero. However, if we further depreciate the property, that would further lower the basis below zero. Is that ok ?

If we reduce the distribution to account for depreciation, the income would accumulate in the fund as potentially non-OZ property and could make the fund fail 90% test.

What is the right way to handle this?

Thanks

Hi BP folks,

Trying to get some opinions about my current situation with an investment. The subject property has been a non-performer in my portfolio ever since I got it (tenant churn, things breaking down, etc). So much so, I finally decided to get rid of it after I found myself with another repair that has to be done.

However, I also realize that I have really good mortgage terms on this (3 % , 30 year fixed) so it would be a shame to let that go especially since the mortgage rates are anything but above 6 % now (perhaps even more).

Are there any creative strategies that could help me in this situation? Something which allows me to keep the mortgage but avoids me putting in more money into it. One way I can think of is bringing in a partner to share some of the expense. Are there any platform or companies letting investors do this easily? 

These are key things I am considering

- Imminent repair that would certainly kill the cash flow for next 1.5 year at least. (Primary reason I wanted to sell)

- Investment has appreciated about 30 % since I acquired (secondary reason to sell, locks in some gain for me after accounting for all money in and sell cost).

- Good mortgage rate (Primary reason I would want to hold on to this for some more time and hope that it stabilizes).

I received another quote from Arcana which is more competitive and about 80 cents per dollar of replacement cost.

The agent described it to me as an "excess and surplus lines carrier". I did some search on what that means and this link provided good information.
https://generalliabilityinsure...

However, I am still a bit unsure about if there are any major downside of going with an"excess and surplus lines carrier" vs a standard carrier.  

Thanks @Bo Bond . This is really helpful. Looks like the quote I have received so far are assuming $1.05  for the replacement cost.  I looked my property is just north of I-10 in Katy but perhaps they still consider it tier 1.

 @Cameron Moore sorry for the dumb question but how does roof age affect the premium - newer roof implies higher premium (because replacement cost is now higher) or a lower premium (because it may not get damaged easily with for eg hails).

 Thanks @Brad S.but unfortunately, I am not eligible for USAA

Hey BP Folks,

We just closed on our second property in Houston and I am currently shopping for a cheaper insurance option. I was told  by my broker that most carriers have moved out of Houston area. I am wondering how true is that?

From what I can tell, the insurance quotes I have from 2 different brokers are from the same carrier and they both claim that this is the cheapest option they have found. And it is still  much higher than my target (typical percentage that I allocate for my portfolio).

Wondering if there are other strategies to reducing the premium other reducing coverage (shopping around doesn't seem to be helping so far since I am being quoted the same carrier).

The house was recently renovated by seller so perhaps the upgrades are not in most insurer's database. But then I wonder, if doing upgrades to a house would increase premium further (because the replacement cost could go up) or bring in down (since the probability of damage or liability claim might be lower now).

Thanks in advance for all your insights.