All Forum Posts by: Paul Haviland

Hey everyone - I have a close friend who was approached by a company to place a cell tower on his land.  I believe they are now offering $1,100/month with a 5 year term. Included is the right to 3 separate 5 year extensions for a possible total term of 20 years. There is a modest rent increase/ year. The cell tower will be in semi-rural lower Michigan. 

I don’t know enough about this niche market to provide context and have provided a few resources to them, but was hoping someone in this great community would have some expertise and or additional resources I could steer them towards. 

Any details/information/5thoughts are appreciated. 

Cheers,

Paul

@Lance Jenks

Hey Lance - congratulations on a great start and for being incredibly disciplined to arrive at your current state. Like the others, my answer will vary depending on what you are looking for. I know a lot of people will berate you for the "idle equity" in your first investment property, but there are some scenarios that strategy makes perfect sense. I met someone who had a specific cash flow goal for retirement, but didn't want much management. They wanted to meet their cash flow needs with the fewest properties and the fewest tenants possible. This led them to free and clear single family homes in great areas. While that strategy isn't as efficient from a pure ROI perspective, it is in terms of their time.

Assuming you want to grow and scale as the title suggests, I think there are a few paths you can go down.

1. Find more property you want to buy and that makes sense for your goals. I put this first as it is a tight inventory market and may price challenging.

2. Refi your first investment property to help fund future purchases. You are already the beneficiary of the markets great rates, this will be an excellent source for you to tap when you need to.

3. I’m not convinced you will find a long-term renter at an amount that makes a ton of sense for your lake property. That being said, air-bnb could work, but is more time/effort. I may think of “flipping” out of this to realize the equity you gained from the rehab and deploying it again in an asset that will be better suited for long term rental.

Good luck!

Paul Haviland

@Lee Alderman

Hi Lee and welcome. I'd recommend connecting with the REIA and also the group that @Hussain Harun and Chela run.

Is your rental that is paid off local?

@Adam Ramsey

I don’t think it will have a significant impact on values there. Those are already some of the most affordable houses in town. I don’t own anything that close, so I don’t have all of the details, and I know that if I lived there it is something I could easily be passionate about, but I don’t think it will have significant impacts on value.

I do think at some point, it will make sense for you to sell the home, but I would advise holding as long as is reasonable possible, or when the Value of the home increases at rates much faster than your rent. Then You will see some of the metrics changing a lot, and you may choose to 1031 into something bigger than the SFH.

Cheers.

@Spencer Dixon

You don’t go broke taking profits, but I’m more in the camp of Refi and hold. If you have a quality asset that is cash flowing, in an area that is reasonably convenient for you, I would keep it.

Good luck.

@Gwendolen Rowe

1. My recommendation is to first ask what they think a fair price is. That of course doesn’t mean you need to use that, but if they look at Zillow and use that number, then you would get a great price, and take away the need for anyone else’s opinion of value.

2. I wouldn’t advise giving them a lease through October. Our market here is very seasonal. And if they move out in October it will be hard to find a new renter or a potential Buyer. I would resign until 3/1 ... if you resign at all.

3. I would connect them with a great local lender. If you PM me, I could share some names. As the seller making decisions based on their current and future financial situation, I would want to know they can perform and not just take their word for it. Also, if they are only 8 months from qualifying with conventional financing, a good lender could connect them with a short term in-house loan to bridge that gap and allow them to close sooner.

4. Seller financing is not too complicated or scary, but if you want the cash now, it is likely not the best fit for your situation.

5. When looking at comparable properties for this unit, you can’t really use Madison. It is a very different market than Black Earth.

What is the monthly rent you are getting?

Hi Tyler Kennedy - Any update here. Wishing you much success on your first project and bummed it sounds like a bumpy start.

I have professional snow removal at quite a few places. The price ranges from $40/trip to $500/trip. It depends on the job, so telling you what I pay won’t provide much context. This summer, have it bid out by 2-4 companies. I’ve seen very wide ranges in pricing between different companies for the same building. Often it will depend on how close it is to the rest of their route and how much shoveling vs. plowing. I have a good relationship with my current vendor, so I defer to their judgement on salting. I also always leave a bucket of salt at the building for the tenants to use as needed.

Hi Everyone - 

My question is in regards to tax returns.  I'm interested to better understand if an option fee, for a property you successfully close on, is an expense, or somehow added to your basis and depreciated.  If it is depreciated, what is the schedule?

Is there a limit to your ability to shift more money towards an option fee to reduce the price beyond what is reasonable in a given market?  For example, the property is worth $200,000 could I have an option fee of $100,000 and a purchase price of a $100,000?  If so, what would the implications be?

Thanks in advance for all the help.  At this point, the question is theoretical.  If it is something that I do, I'll of course consult my CPA for confirmation of any information provided.

Thanks,

Paul

Hey @Chela O'Connor & @Hussain Harun - 

I'm excited to see everyone again, and hear what is new with each of you.  I'll plan to bring details on a recent deal to the meeting we can treat it as a case study.  I was dealing with a very unique property that I was lusting over, but the Seller wanted what seemed like an unreasonable price ($1.5M for a 4 unit in Madison, WI).  

I'll share how I approached the Seller, and how we massaged the deal to make it a win-win.  I'll bring real numbers for us to run.   Hopefully, you will all be able to point out some ways I could have made it even better as well.  

Cheers,

Paul