All Forum Posts by: Matt Ward

 Yes I agree.  Not that I think investing for cash flow is wrong (I invest for cash flow myself), but to discount data and analytics that suggest certain cities have not and will continue to not keep up with inflation not only hurts appreciation (especially in areas where property value is ALREADY declining), but will eventually hurt your cash flow too.  If populations reduce in a city, eventually you have a surplus of supply, which means the tenants have control over market rent... lowering cash flow.  Then you can't even dispose of those properties for what you paid for them.  

 I'm not sure there's a "right answer" here, but if it were me, I'd pick one who knows CA first.  That's your resident state and arguably the most complex when it comes to state tax laws.  Your filing requirements in Ohio may be very minimal compared to CA.  Just an opinion.

@Eric C. while I understand where you are coming from, I respectfully disagree. 

I think it's a hasty generalization to say most people on a forum/community are doing anything, regardless of the topic.  I'm not sure I'd be comfortable saying "most people here" do anything etc. etc.

While I hear your opinion re: hourly, that's not the way the industry is headed, and for the most part it is already mostly fee based.  In fact there are plenty of articles on this subject to the extent that and hourly fee structure is a disservice to the customer.  An experienced CPA who leaves a Big4 to set up a solo shop would either price himself out or be killing clients with fees if he charged his hourly rate to every client.  

Furthermore, you incentive the provider to either work too fast to keep your business because they know you have a ceiling in terms of what you're willing to pay....OR you incentive providers to bake in more hours to "make sure everything is right" because they know they can take advantage of certain clients.  These are just some of the many reasons, the more obvious ones, as to why the industry is going fee based.

If a new client comes to us, we look at the return, consult with them and understand their expectations and what they're looking for, and based on that give a competitive quote.  Competitive is verified again by the local market as a certain percentage of clients switch providers each year and we know previous fees paid.

I'm not even just speaking about solo providers or family firms, I know people at the Big4 as well as regional firms like GT.  The head of individual tax in the Bay Area at GT can't accept any new client for less than $3500 because A) they are fee based for reasons above, and B) we as professionals now are realizing there is a shortage of top tier providers and as clients continue to move toward those fewer and fewer professionals, in our effort to maintain our level quality of service, we need to make sure our time is being accounted for by the value we provide.

Again I hear what you're saying.  I respect your opinion.  I disagree and am just providing reasons why. 

@Brandon Hall totally agree and well said.

@Account Closed I'm not sure I'm in agreement with the statement "Historically, the tax courts have sided with the IRS when they use Section 162 against rental real estate investors, so this would be a losing battle if challenged."

I do think more clarification would be great/needed!

 I agree that a good rule of thumb is to go with the cheapest or most expensive.  I disagree that a "basic RE tax return with 3 rentals etc." should only take 2-3 hours, and that $200/hr is fair.  Perhaps there is a geographical difference, but that is simply way off the industry standard in my area... and I know for sure because we receive clients who leave other firms/CPA's.  Sometimes we charge more, sometimes less, than the last professional... but not at that rate... not even close.  The reality is, whether you think it's fair or not doesn't matter.  Our other clients see our value and pay us accordingly, thus setting our baseline or barometer.  Then, it would become an inefficient use of our time to do such a return for $600.

Secondly, most of your posts on this subject tend to refer to the fee and service related to a tax return whereas someone sits down in front of all the data and can complete the return from start to finish.  You are not factoring in all of the email/phone questions throughout the year, plus the act of gathering all of the relevant info from the client, working with financial advisors and brokerages if necessary, RE taxpayers may likely have estimates so working on quarterlies, year end tax planning, and not to mention any **new changes in tax law** that may REQUIRE more research.  So many more things too, such as just a simple final year K1 could add a couple hours for a basis calc.

I appreciate your opinion and we may be comparing apples to oranges, but just trying to give you and everyone else perspective on what a full, year round service entails and why pricing a return based on the 3 hours of data entry you are referring to is simply inaccurate.

 Yes you're correct... should have worded it differently but thank you for the correction!

@Brian Garlington I don't think you're throwing shade LOL I don't invest in SFH so it was a genuine question. There are very clear indicators (in my opinion) about Cleveland that makes me never want to buy a complex there. That's just me.

I understand the game of acquiring a bunch of cheap SFH in cities like Cleveland... I'm just looking at it more long term and was curious if you were too? For example, those metrics I mention.... should they continue, Cleveland will have too much supply and not enough demand, bringing rents down. Then if you want to move your capital to another market, you will have a hard time getting it out at that point because the value of the home you bought has gone down, as they already are going down.

Section 8 is great, one of my best friends owns 15 Sec8 apartments in the Antioch area and does very well by them.  I get it... I'm just curious about choosing Cleveland for a cheap entry point vs somewhere like Phoenix that is projected to have a supply shortage for the next 10-15 years... I'm literally curious...?

Regarding the 75% gross helps with mortgage, that's great.  Something I'm not in tune with because I syndicate MF, but happy to learn something new!

Regarding the Bay Area and the 1% rule, all of the complexes we've syndicated this year are in Northern CA and followed the 1% rule. Again, can't speak to SFH, duplexes, etc.

If you don't like metrics and analytics, that's cool.  No biggie on my end.  I do agree that investors should be comfortable.

If you are open to answering my questions of Cleveland vs. other cities that have better economic outlook, that'd be great because I'm just seeking to understand.  Best of luck to you!!

Hi @Jon Blackburn, @Natalie Kolodij is spot on. If you sell that stock and the result is a $100k capital gain, you would pay capital gain tax rates on that when you file your tax return. However, if you take that gain and invest it into a property in one of the identified 'Qualified Opportunity Zones', and you hold that property for at least 10 years, the cap gain goes away. This could be an apartment, duplex, SFH... as long as it's in a zone. I believe you have 180 days from the day you sell your stock to redeploy those funds into a property. You can also seek out a 'Qualified Opportunity Fund' which is basically a syndication with the underlying asset being in one of these zones. This is of course a much more passive investment. Depending on what you're looking to do, one option might be better than the other. Connect with me for more info if you'd like.... best of luck!

@Shiva Bhaskar @Brian Garlington Hey guys, just curious what makes you want to invest in Cleveland at all?  I'm sure I'm missing something, but Cleveland has had a almost a 20% population decline since 2000.  Also in that time span only a 8% jump in household income while median property value has declined by about 7%.  Median gross rent is < $700/month.  To me, Cleveland (like most of Ohio) isn't even keeping up with inflation.... Most investors I talk to like places like this with low property value and the promise of cash flow, but in the end if you're not even keeping up with inflation, what's the point?  All the best.