All Forum Posts by: Matt George

@Levi T. Great Post. I have always been intrigued about bundling up a bunch of townhouses. You mentioned you did the letter campaign "at the right time." Are you still doing that today in this market? I have tried that a little with townhouse communities and got a ton of sellers calling on it but asking for inflated prices. What has been your experience at buying them from individual townhome sellers below market value?  

How about financing a truckload of these townhouses. . . You said you looked at a 105 townhouse portfolio? Would that be a nightmare to finance compared to single multifamily site with 100 units? I am just thinking you have 105 different legal descriptions, appraisal issues with so many different issues?  Conventional wisdom is to go with big deals where there is less hassle vs bundling up a bunch of individual townhouses. You seem to have it down to a science so I am just curious how you pull this off? Thanks in advance for any help!

and don't be afraid to pay extra for a student rental that is in a prime location for students. With an A+ location (like right across from campus), you will always have it rented with zero effort (it can even be a feeding frenzy with multiple groups interested) and for the highest, almost absurd rent amount. The extra cost of the same house that is right on top of campus will be worth it. This is market dependent but oftentimes it is parents that pay and if their kid says this is where we HAVE to live, parents will pay it and not care if the surrounding market is cheaper. 

I couldn't agree more with Evan and Steve. When starting out, look for community banks with just a handful of branches. Stay away from the huge Wells Fargo, Bank of America, etc. They will give you way too much grief in having to check all of their underwriting boxes. 

For these little community banks, be very courteous and easy to work with. Don't go in acting and talking like you are entitled to a loan or that the bank is lucky to have you there. They were already in business before you called them. . . 

Be willing to start a savings account and put deposits in. That is their lifeblood. 

Call around to as many banks as you can. The rates and terms will vary and even if you call five and they all seem the same, the sixth bank might be a lot better. 

Thanks everyone for the responses. Depreciation certainly doesn't hurt the deal, especially if you are a real estate professional. And if you are throwing off a ton of cash flow, then it is pretty low risk to add another property to the mix. A lot of active work for a 5-6% Coc return though but definitely low risk. . .

Thanks Eamonn, aside from bonus depreciation which allows us to fast forward depreciation, would you expect any changes in how RE investors use depreciation? For example, do you think 27.5 years could get lengthened or would you say that is pretty well established? 

I was once replacing a toilet in a unit because the tank lid cracked and we couldn't find one that fit the tank. A older gentleman came by in a rattly old truck. He owned over a hundred single family homes and condos and had to be in his 80s. I had heard of him so we got talking and he told me that he started landlording back in the 60s and still worked 6.5 days per week. Then he asked if he could have the old used toilet because he thought he might have a matching tank lid for it. 

I guess "Mom and Pop" was not best description for a company with 50 Mil worth of apartments. I just meant the smaller family run company with a few hundred units, as opposed to the institutional outfits or the syndicators. The family run companies that I know typically started back in the 80s or maybe even 70's. They kept adding units, bumping up rents, and stayed the course. They are now senior citizens. They self manage with their own management companies. Their kids are sometimes active now. These people are all over the place and they have no idea what bigger pockets is. 

The weird thing is that some of these high net worth investors I know are still super active in fixing toilets, doing showings, etc. Whatever floats their boat I guess. Their mindset is just different from the "4-hour workweek" that is touted these days. 

Is this a concern to anyone? With Trump gone and the possibility of him not having paid much taxes, maybe real estate investors will have a bulls eye on their heads. It is my very basic understanding that the Tax Reform Act of 1986 crushed real estate investors by limiting passive losses. Maybe I am wrong about that since I was not personally investing while in 2nd grade.

This is not meant to be a political post, but just curious for some of you who have been around for a while? Is cost segregation well established or could that go away real quickly? 

If you have all the actual receipts, it will take some organizing. Assuming your CPA says it makes sense to do the cost segregation, the big ticket items will be asphalt, sidewalks, flooring, landscaping, site work for drainage and compaction of the area under driveways, appliances, wall coverings like drapes, fences, etc. 

Plumbing is considered part of the structure. However, don't forget to include plumbing lines for the purpose of hooking up appliances and dishwashers or venting for dryers. 

I am not a CPA so check with your CPA but this is just my understanding and what I have seen in the past. 
 

Nick, Good feedback on the syndication model! I am not a syndicator and much of my competition isn't syndicators. I am more curious about the bigger mom and pop owners who have owned tons of apartments for decades--maybe they have a portfolio of 50 million in value. They have a ton of passive income, and depreciation deductions have been used up. Let's say their taxable income is five million per year. They are getting killed on taxes. . . 

To combat their high tax bills every year, what if they bought a 5-6 cap, class B or C rental that doesn't even cash flow that much? If the price of that hypothetical complex is $10,000,000, they could do a cost segregation and generate a depreciation deduction of say $1,000,000 in the first year. Depending on the state they are in, this would save them $400,000 - $500,000 in the first year on their tax bill (which is nice). This would be really advantageous for buy and hold people. Assuming they put 25% down (2.5 mil) and the property simply breaks even in the first year, their overall return after the tax savings is 16-20%

I am not an accountant nor do I personally play with big numbers like this, but does this make sense? Maybe I am missing something??? Is this what smaller buy and hold players like me should shoot to do?