All Forum Posts by: Matt Devincenzo

Something is missing...if there isn't a Board and the HOA (or I assume more likely a COA) is newly formed then why isn't the developer still in control of the HOA? The manager doesn't determine what they do and don't like, they 'manage' the HOA to comply with the law and guidance from the Board. So no Board, nothing to manage except State law...the organization docs for the HOA should have identified when the developer maintained control, the terms for it to be turned over and at turnover you would establish a legislative body which would be the Board...

To go a bit further into what Dmitriy mentioned, since your IRA earns the income the tax treatment is specific to your IRA. Assuming you purchased in your IRA for cash as most do, then there's nothing to deduct or depreciate because the income is non-taxable inside the IRA already. If you did finance some of the purchase using a non-recourse loan, then you need to read up on UBTI/UDFI and there are some taxation benefits that the IRA can achieve since it now owes taxes in that scenario.

It sounds like you've gotten some solid direction above, but a few flags stood out to me in the above discussions and I wanted to point them out to help make your decision.

- You mentioned this sale is tax free 121 exclusion, which is great, and seems like a solid start to your goal.

- The townhouse you're moving into is currently a rental, but you plan to live there two years for the 121 exclusion. Just a heads up this will not be tax free, it will be a pro-rated exclusion. You have to pay depreciation recapture and gains on the pro-rated time it was a rental.

-Depending on your gain above, you could get a partial 121 exclusion and a 1031 on the townhouse. Maybe it isn't worth it, but you should consider the numbers and decide...that could push you towards purchasing another rental. 

- You mentioned paying down/off a rental and needing to consider the tax implication. I'd suggest that there is essentially no tax implication for this as compared to your alternatives. If you pay down $100K in loan saving you $1K in monthly costs against rental income, or you invest that $100K in something that generates $1K in net income the result is similar. In both you are now paying taxes on an additional $1K/mo.

-The mention of syndication being less risky than HML...I'd suggest it is more risk, possibly much much more since you don't know whether you are good or bad at vetting the operator right now. With HML at least you in theory can vet the property and keep a low LTV to ensure you can be made whole. With syndications many operators are using finance magic to juice returns, but that can result in full wipeout on the investors. Definitely do a search here for some recent stories on capital calls and risks with syndications...even on some that have been operating many years...

For $10K and a lower rate I'd be willing to consider delaying...but only if I knew that lender two was solid on closing in a relatively short timeframe. This is why I use a loan broker...I want his experience with who can do what they say and who is a delay. 

Final thought is to make sure switching lenders doesn't blow a contingency and sink the closing that way. 

$10K savings to you or higher cost to you? And what timeline can lender #2 close in? One day, one week one month? 

Lender #1, what do they need for clear to close? Can it be wrapped up by the end of the week? 

There was a member on here a decade ago that focused on these type of deals...K. Marie Poe...her account is deactivated, but a search may turn up some of her info if you search the name and someone mentioned her in their replies. The other is Rick H (https://www.biggerpockets.com/users/rtpg1) he's also commented on quite a few title issue/ AP/messy deal threads over the years and has quite a bit of experience. 

Your reading of that section isn't exactly what I would take away. He doesn't say no inspection, he says no inspection contingencies. Meaning that if you fund a $5K EMD and then decide not to close you lose the EMD, or you pay for an inspection up front and risk missing out on the deal while you're waiting for the report. Typically those purchasing cash aren't inspecting every home, they're walking it or having their go to GC walk it and already know what they see that may be a concern.

The wholesalers I purchased from it was always the same. Any DD you want to do, inspections, code enforcement lookup etc you're welcome to do but there are no contingencies so once you go UC you buy or lose the $5K. 

Here's a post I made on "non-conforming" vs "illegal/unpermitted", understand they are NOT the same thing. It sounds like you have an un-permitted unit, which is essentially always a risk since there has been no notice to the AHJ that it exists and they can therefore initiate a code case to have it removed in most cases. The challenge with S8 in this scenario is you always have a piano over your head and all a tenant has to do is call the code office to create an issue for you. 

Where do you live, and where are your units? At those price points I'm assuming this is a more cash flow area like the rust belt, or other mid west geography. Is your $$$/mo CF a true CF, or is that your net right now without any maintenance coming up? Do you have a PM or is this your job now? 

Overall I would personally consider how I can still grow with the freedom that I have focusing on my real estate. Consider offloading an underperformer, or a high equity property and getting better, larger or more assets. Do it very intentionally, not just for the sake of scaling up, but to get better quality or easier to manage properties that will replace lower quality or harder properties. 

As far as financing, if you have real CF then it shouldn't be an issue. Try talking to local banks who want to do business with you. Also listen to them if it is difficult to get financing...they're telling you that your math may be off. I have a friend who is a banker locally, he's seen business bank numbers for 40 years...he know what makes a strong business client and when it is a weak business with some good years. If it is a good business with a hard to finance issue, he'll work with the loan team to figure out how to lend to them. He knows the loan will pay and they won't default because he knows they're solid. 

Well anyone can write anything into a contract, but whether it is legal and enforceable is for the courts to decide...

It is State law here that a contractor must call 811 or they are liable for the costs. If they call and then hit something incorrectly marked then there is some relief from that liability. I'm not sure if they can realistically pass that liability off to you simply by stating it in their contract. So ultimately this may require a discussion with counsel, and you may have to settle on splitting the cost. I had a project last year that a sub hit a conduit that was marked out and the utility made a claim many months later. The GC and the sub ended up sharing in the cost mostly (I think) because it was better than the finger pointing game that had already started, and realistically the attorney's were the only ones about to win...