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All Forum Posts by: Matt Devincenzo

Matt Devincenzo has started 13 posts and replied 3069 times.

Post: Section 121 with LLC

Matt DevincenzoPosted
  • Investor
  • Clairemont, CA
  • Posts 3,149
  • Votes 2,653

This is going to be a very individual scenario, but most likely it isn't worthwhile. Hopefully someone with tax accounting knowledge can jump in here with more detailed analysis, but I looked at this a bit several years ago...

1) You still have to pay the depreciation recapture on the sale decreasing the net benefit of this approach due to the large tax payment in the 'sale' year

2) The LLC would need to not be a passthrough entity so that it can be taxed separately from you, so you have to add another tax return cost for the years going ahead

3) Taxing it separately from you likely means corporate status and corp. taxation rates which are higher than yours and I've heard many times over the years to avoid titling real property as a corp...

Overall from what I've seen this only makes sense in a select few scenarios, which for most people aren't in play. 

Post: HOA with Only Two Parties...

Matt DevincenzoPosted
  • Investor
  • Clairemont, CA
  • Posts 3,149
  • Votes 2,653

I don't think the two unit COA is that bizarre, you either have common areas to maintain via the COA or you have to do cost sharing on all expense by each owner sending in half. Either can work, or either can be a huge pain, but that's the reality of common area ownerships.

I've worked on some small 2-3 unit condos like this doing the condo plans and the CC&Rs have always included provisions for financials, budget etc. as well as dispute resolution. Find those sections in your docs and file suit...it seems you've tried the nice neighbor route, so you need to simply press the issue legally now. It may seem trivial for $3-4K/yr, but just consider it as a necessary action to be able to sell one day, otherwise you're likely to be in a serious bind later. 

To be honest the monthly payment doesn't sound outrageous given the possible items covered, but who know without the accounting...and any buyer should want to see that accounting when you sell, so sort the issues out now. 

Post: Power District Entitlement

Matt DevincenzoPosted
  • Investor
  • Clairemont, CA
  • Posts 3,149
  • Votes 2,653

What product type are you implementing for a 200/Ac density? Would this be high rise or would these be zero parking to do a mid-rise? I'm not familiar with the area, but do entitlement work in SoCal. In our area entitlement is quite lengthy, but given the right project very profitable. More and more builders are tending towards just construction, and there are fewer regional builders entitling their own projects so having a product for them to buy is worthwhile. 

How have you been making payments so far, to a servicer or directly to the seller? 

If a servicer, continue paying as agreed and allow the servicer to sort out the issue on their end. If directly to the seller, then you need to ensure that the payment is made, but also that it is made to the person who is entitled to it. If for some reason they can't get this sorted out by the next payment date, you should figure out how to physically escrow that payment somewhere...this at least protects your payment until you're confident who it is supposed to go to in the future. 

Post: Loan affected by adding unit to a quad?

Matt DevincenzoPosted
  • Investor
  • Clairemont, CA
  • Posts 3,149
  • Votes 2,653

As mentioned above look in the loan docs for reference to 'condition' or 'use'. Here is a clause from a Heloc I have that would be relevant:

Trustor agrees that the nature of the occupancy and use will not substantially change without Lender's prior written consent. Trustor will not permit any change in any license, restrictive covenant or easement without Lender's prior written consent.

Now the practical answer is no one is coming to check on the property most likely, and unless you default no one will likely care. On my property above I'm prep'ing to build a new unit...you could arguably say that changes the nature of the use...and it likely does. I plan to simply get my permits and get the unit built. In your case going to a fifth unit as noted above could actually reduce the value, so I'd be cautious of that since that materially degrades their collateral. But if you have a low LTV, it's not likely an issue anyway.

I do condo plans as part of my W2, and these SF calculations can vary based on the coord with the attorney and owner as far as how the association is originally set up in its budgeting for dues. I recently worked on an amendment to some condo plans we did 15+ years ago and I had to re-calculate how we got to what was in the plans and the values changed over two or three iterations as the attorney represented what to include and exclude. 

The unit SF is one component of its size, but then we will sometimes add exclusive use common areas  as well as a pro-rated allocation of the common area. So your additional ~240 SF could be the foyer, hallway and bathroom spaces that are allocated by percentage to the unit. Sometimes if there are large structural components like columns running through a unit space, they could be excluded from the unit area itself like a donut hole in the middle, making the outside to outside measurement larger than what is in the condo plan. You can also not include those extra spaces, and then you simply have some association spaces that are excluded from calculating the percentage.

In my admittedly limited involvement with the leasing exhibits etc, my experience has been that again it depends. If you represent the leasable space as what's in the condo plan and they accept then that's the space they're paying for, I'm not aware of a legal obligation one way or another. If they think it should or should not include certain SF then they need to adjust the lease rate they're willing to pay, or revise the leasing exhibit/description to match their expectation of leasable SF.

On Wed this week I did an industrial outdoor lease exhibit for 3 Ac gross on a larger 20+ acre site. My client (the LL) directed to include the onsite frontage screening landscape outside the fence as part of the leasable SF even though it's not useable by the tenant. They acknowledged that if the tenant wants it adjusted to exclude that area then we'll revise, but they want to charge for the entire space...to them it is an integral component to leasing the yard since the City mandates screening landscape. To not charge for it is to cover a cost that any tenant for the entire yard would need to address themselves...from the tenant side they can say that including it reduces their useable area below their 3 Ac gross...neither is right or wrong, it's just differing perspectives on what is best for them. 

Post: How much will my bank lend me?

Matt DevincenzoPosted
  • Investor
  • Clairemont, CA
  • Posts 3,149
  • Votes 2,653
Quote from @Patrick Osterling:

Thanks @Collin Hays! More favorable terms sounds great to me, and I've heard this strategy before, but I'm not sure I understand how it works in practical terms. Could you share an example or two how that actually works in practical terms? For example, I've used several banks for loans: Flagstar Bank, All Western Mortgage (a broker), PenFed Credit Union (HELOC), NewRez and probably a couple others I'm forgetting. None of which I never actually met in person. But are you saying to find a local bank branch and physically go in and develop a personal relationship with a banker? If so, how many deals/loans do we need to do before I can expect more favorable terms? How do you know which bank/banker to establish a relationship with? What if I like a banker but another bank is offering better terms on the first couple deals? I'm having a hard time wrapping my head around how to actually make this happen in today's world. Thank you!


 I'll give you a great local example...I go to church with the bank president. The bank is here in San Diego and is Endeavor Bank. He and his partner have been in the SoCal business bank world for 40+ years, and entered it at a time when local banking was what businesses did. They both were up in the Glendale area for 15-20 years or more, and were very involved with the local business community. After living through the GFC and the shrinking market for local banks, they saw an opening in the market for what they call "consultative banking" like they had years before and decided to start a bank. This 'consultative' approach means their business clients come in talk through problems and they try to provide a bit of outside business 'coaching' if you will, or connect you with another client who can assist. They want to help your business grow so that their bank will grow with you. 

The other component here is understanding the bank's business as well. Collin mentioned a local bank that is keen on having Dr.s as clients, Endeavor is a local SoCal business bank, others could be agricultural or manufacturing oriented...some in the news recently for failing were VC and crypto centric. The point is if you're a consumer banking customer you don't offer what their business model is designed for. So consider your banking offerings and then search for local banks that cater to that.

Post: Why do Wholesalers Lie

Matt DevincenzoPosted
  • Investor
  • Clairemont, CA
  • Posts 3,149
  • Votes 2,653
Quote from @Kristi K.:

....

This is how they advertise it, $180,000

....

The county has it appraised at $188,000 and here are some pics.  

My question is how can someone be so far off on value and continue to keep their job? 
...

I'm not familiar with the area, so could you share what your value expectation is on this? I didn't see anywhere that you posted what they said ARV was, or what you think it is based on comps...the County assessment has no bearing whatsoever on value. It could be 50% high, 50% low or right on the money but no matter which of those three it is makes no difference. The comps are all that matter.

Post: Is Bigger Pockets mostly for rental properties?

Matt DevincenzoPosted
  • Investor
  • Clairemont, CA
  • Posts 3,149
  • Votes 2,653

Lots of different areas of RE are available here. If you look back at posts from 15ish years ago it was a lot of sales, marketing and wholesaling because that's what many were doing through the crash. Then it shifted to more flips and rentals, with a lot of discussions on how to capitalize since the credit markets were frozen. And eventually it shifted to more straight rentals as the market for capital got easier again. And most recently the last 3-4 years there were a lot of syndication discussions. Through all of those there were still posts on the other subjects it just morphed as far as the percentage of content. 

One thing I will say, and do with it what you will, if you are digging out of a bad financial position I'd suggest RE is not for you now. It takes capital to do this business and if you don't have it I wouldn't suggest throwing it into a marketing machine for wholesale deals. Of course your individual experience may vary and maybe you have a marketing and sales background so it is a good fit. But truly wholesaling is a hard business and takes a lot of up front cash to get going before you get deal flow. 

Your scenario is possible but not probable...admittedly I have never done what you suggest I've been the seller financing sales in my IRA, but I have read several BP contributors that have substituted collateral. One who is active still and recently did a case study write up like this is Don Konipol, the other pops on every now and again and did a BP episode many years ago Aaron Mazzrillo so search those two names and read some threads.

A more likely scenario is not what you mentioned as the ever growing note/value deal, at least not as outlined. What I recall from Aaron's deals was it wasn't about finding ever larger seller financed deals, but keeping the old seller as essentially a PML....keeping you from constantly looking for new funding when you already have someone that agreed to fund you essentially. 

It is not typical that you will find SF deal after deal, and if you are actively marketing for distressed sellers many...most...will want cash sales. The substitute of collateral was more of a scenario where you sold for $155K, and instead of paying off the $88K loan in your scenario, those funds stayed at the title company and were used on a cash purchase happening nearby in date. 

Using your example, you sell Mon for your $155K and have a contract on a new home for $100K two weeks after this one sold. So the first seller agrees to direct title to holds the funds and when you close on that purchase you record a new note for the first seller on the second home. Seller number two walks away with all their cash, and seller 1 who already agreed to SF has now become a PML without the challenge of negotiating each deal with them. To you there was little change, you just keep paying your note but now own 123 Main St instead of 345 Side Way, and you have your equity as cash in your pocket from sale 1.