All Forum Posts by: Pixel Rogue

Quote from @Drew Sygit:

@Pixel Rogue everyone has different future plans - many though haven't thought that far ahead!

As already mentioned, you could sell via seller financing to lower AGI, as all you would have to claim is the payment income - until balloon payment received.

Did know an investor that had 14 properties paid off and he moved into one every two years to then sell with the $250k single exemption. He had a Viper and several other toys:)

Are you planning on passing any of your wealth to others?
- If so, 1031 into something bigger and easier to manage and then when you pass, the inheritor receives your property(s) at a stepped up basis - subject to Inheritance Tax limits.

Otherwise, sell one every 1-5 years when you need the cash, so you can plan expenses to offset capital gains.

14 properties - presume these had to have been single families.

Oh, I'm modifying the original post to mention leaning toward creating a trust which we manage..so we would own very little yet manage the trust which owned investments and such.

Here is what I understand/misunderstand (better or worse) on moving every 2 years (as we are open to that albeit pia.) 

• Multi-unit would only support a %, so a quad would 25% and prorated over all years of ownership....witteling advantage to not worth the effort. 

• Single unit properties get pro-rated. So if you have the property for a total of 10 years, moved in at year 8, little value or tax advantage. (IF you purchased and lived in property asap, then rented it out, then returned to it it sell it years later - better plan. That never happened.) 

So not as easy and moving every two years if you have had the properties for any length of time. We have also toyed w/the idea of buying/moving into fixeriuppers and selling every 2 years.

Quote from @Greg Kasmer:

@Pixel Rogue - Looks like you have a VERY solid portfolio. Just want to clarify your question... Are you looking to sell some/all of your portfolio by minimizing your tax exposure and be more "maintenance free"? 

I'm still in the process of growing my portfolio, but have heard others 1031 all their smaller properties into a larger building and have a property management company manage, OR, set up a seller financing deal with another buyer that gives you the cash flow you desire. 

I wouldn't miss letting go of the maintenance. Today I had a heater issue and snow company that was late handling commercial before residential so we ended up clearing it.

Open to each option. Love the idea of rolling them together into a larger property and have a company then manage. I looked into the maintenance option years back to discover a trend of:  apx. 8% monthly fee which only included rent collection (everything else from maintenance to turnovers etc, extra, and poor reputation on repairs.) Rent collection is zero effort. 

For the areas of interest (you are local so I'll say suburbs west of City Line Avenue) there are few and far between -and- have many investors sitting on large sums of cash to jump on anything that comes up (where I would be navigating a reverse 1031.)  Not keen on seller financing component. 

I've had a particular interest in NNN and would love to ask a few questions via DM if open to it. (taxes would be extreme, especially for the properties held since 2000's.)

Hello everyone,

Imagine this topic would get more engagement in a Creative Financing space. We have been in real estate (long-term rentals) for over 20 years now and looking forward to hanging up the maintenance hat. We want to plan in the most tax vantaged ways (which includes keeping future AGI as low as possible) and open to new-age and creative concepts.

Respectfully ask to keep discussion to topic vs. selling one's self or services seeking new business. Thank you for understanding. 

Portfolio
• Investment quad - owned for close to 20 years. Low LTV, 30yr fixed @4.5% personal (1)
• Investment condo - new const. high end purchased w/1031 (from 20yr quad) in 2019. LTV dropped to 50%. 30 yr fixed @ 4.3% LLC (2)
• Investment condo - new construction high end purchased in 2019. LTV under 50%. 30 yr fixed @3.75% LLC (3)
• Investment condo - purchased 2021. LTV under 50%, 10 yr arm @4.5% LLC (4)
• Investment condo - purchased 2021. LTV under 50%. 10 yr. arm @4.5% LLC (5)
• Investment condo - purchased 2022. LTV under 50%. 10 yr arm @4.5% LLC (6)

First Step
• Create trust and purchase forever home via 1031 (which would be either 1 or 2.) Rent for a few years and convert to primary.

Next Step/s
How do we shift while keeping AGI at lowest levels? Expect any step needs to play well w/1031. We meet definition for qualified investor.
• DSTs: Seems as though returns are rather low, low transparency on opportunities (?)
• OZs.
• Retirement communities
• Syndicates (from initial explorations, little transparency from providers, little oversight - almost leap of faith and trust in provider?)
• Crowd-sourced projects (think Crowdstreet, Fundrise, Roofstock)
• Moving into investment for 2 years and sell (seems extreme and low level of confidence in strong desired results.) 
• BBD - Bulk everything together into one large investment, cash-out refinance, rinse/repeat (seems like ongoing work like we have today.)
• NNN - purchase triple net lease opportunity (1031 everything into it, managed under trust, tenant takes care of everything) 
• Sell each off the normal way (even spreading out one a year, heavy tax implications and truly diminishes decades of work.) 
• Give/donate each away

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I expect many here have already been through similar dilemmas and interested in experiences, lessons learned. What other concepts could be added to list of options? Of the list of options, which stand out as better opportunities and why?
(yes, each option has volumes of disclaimers, circumstances and variables...at a high level, conceptually and then we can go deeper as needed.) 

Wish ( knew about DSCR a few years back. Everything worked out and see DSCRs in the future. Do DSCR loans qualify if purchasing through 1031 w/debt-carry-forward requirements?
(relinquished property has mortgage of 200k, so need mortgage of 200k+ for acquired property?

Have 3 loans to refinance in the next few years and DSCR's are added to the option list. Interest rates atm seem quite high so will ride this out a bit longer (and ratios will continue to improve over time.) 

@River Sava ~ Keep me in mind if you see DSCRs dropping below 5%. Reach out w/best interest rate and qualifiers for said rate. 

Been in apartment rentals for about 20 years. Mortgages are all below 4.5% - no intention of changing those. Have a few arms due in about 5 years..those I will finance to fixed rate as rates lower. 

Buy - Rehab - Rent - that has been the bulk of the work. I am not clearly following the the refinance bit. I have refinanced (rarely mind you as there are costs that take years to recoup on a refi) and am happy to see equity build as the mortgage shrinks. It is my understanding that people refinance and then use those funds other ways (personal living, investing, some to buy another property) as a means to minimize tax obligation. To me I'm not seeing this as clearly as those who are deep into the BRRRR philosophy.

ELI5

Also, the rehab part gets old after a while...rehab and maintenance never ends.

Related damages:

When tenant took possession, the living room had a vertical blind set apx 70” long (covering two windows.) When tenant exited, the living room had a single broken horizontal blind and the right window broken. 

Will not yet be ready for window treatments as the renovation is still ongoing, and getting closer to time when itemized list of damages are to be furnished. 

Ok to use an example or intended vertical blinds vs receipt for purchased blinds? 

Ask Rosie also had curtain rods. Curtain rods no longer exist. No plans

None of it was low quality. Everything resolved as good as could be expected w/o court (albeit full renovation was needed.)

Quote from @Kevin Sobilo:

@Pixel Rogue,

1. How do you believe they damaged this door seal? You're description indicates they DID NOT damage it as you describe the damage as "cracking" which is how door seals fail from normal use. You are basing your claim of damage solely on the time the seals lasted not on the type or cause of the damage. The tenant will legitimately claim the seals were of poor quality to begin with. So, I would not claim that as damage at all.

The chipped handles is tenant caused, BUT did they use the door in a way other than its normal use to cause the damage? If the damage is minor, again I think the tenant can simply claim the quality of the appliance was poor and they have the door-seal quality issue to further back up this claim. So, again unless its clear they MISUSED the handle I would NOT claim this as damage.

2. Yes, window treatments are a common one for tenants to break. If you quoted a price in the lease, that is your price because you both agreed to that.

The money is to cover the damages, what you do with that money is up to you.

I personally use the cheapest horizontal mini-blinds from WalMart. They look and operate fine and the cost to replace is minimal. That means, when they are damaged it doesn't eat up the whole security deposit leaving more money to cover other damages better protecting me.

3. I am having trouble imagining the damage to molded window handles. I don't think I would charge anyone for a chipped handle or two for a couple reasons. First is that its difficult to quantify the amount to charge like you indicated. Also, do you have pictures showing EACH AND EVERY window handle prior to move-in? You need to be able to substantiate this tenant caused this damage and that it didn't exist prior and small items like this are less likely to be prove-able.

4. I personally don't charge for small holes and touch-ups unless they are grossly excessive, but I would charge for removing the tape/adhesive. However since you have a charge in your lease and they knew about it they could have taken those steps themselves prior to moving out.

So, as long as the charge is reasonable I would charge it. However if you try to charge $20 for each piece of tape or something else egregious I would expect a magistrate to consider that usurious and not allow it. Keep in mind magistrates deal with MANY MANY cases involving small issues so their rulings OFTEN may not follow the correct technical application of the law. They will substitute in their own sense of fairness knowing people are unlikely to appeal such a small issue. Also, magistrates don't even have to be lawyers to get the job! They can simply take a class. So, they aren't experts on the law like people might think.

I would always try to negotiate with a tenant. I don't think anything anyone offers is "evidence" in court because you would be backing up your claims with documentation such as the lease, or quotes for work or material prices.

Make sure you get your letter out to the tenant about the damage deductions from the deposit though. Not doing that can make you liable to them for 3x the deposit in return! 

Tenant was rather rough on things in general. Fridge door seal I can replace. Renting a unit with obvious damage (door grip, dents and scrapes to front doors has been (ime) challenging. Poor first impression of landlord, kills me to replace a perfectly working (newer) fridge over cosmetics. 

Yes, happen to have before and after photos of each window 

Hello everyone,

Have a long-term tenant who recently exited. We have been fortunate to rarely hold any security funds from former tenants. In this situation we have a former-tenant  hyper sensitive to return of full security deposit (when unit wasn’t returned in good condition) and we are  experiencing a few unique damages. Hoping others experienced similar with input to share, lessons learned etc.

1) REFRIGERATOR: Brand new refrigerator was installed after tenant  maybe two-three years ago. Fridge door seal is cracked in several areas needing replacement. I have fridges for decades and the seals don’t go, yet expect the argument or normal wear. Better still, the recessed handle trim is visibly chipped (stands out as bad.) The seal can be purchased but the recessed trim is only available by purchasing the entire door. Entire door is apx. $550. Fridge door also took a few smaller dents. Doesn’t seem fair to charge the full price to replace the door but what other options exist? I would also sooner apply that amount towards a new fridge than buy the door.

2) WINDOW TREATMENTS - Each window had window blinds. Front had verticals and more traditional horizontal blinds throughout. Upon exit the verticals vanished, one replaced by a horizontal. Few left were broken, never cleaned. Lease has stipulations for condition of blinds.  

A) Lease was older where price quoted in lease doesn’t cover cost of replacement. <- presume that is on me. 

B) Would prefer to install curtain rods now over blinds for most windows. Can I purchase the rods and charge back to tenant as missing/damaged window treatments when originals were blinds?

3) Windows - a fair amount of windows took damage. Clear damage would be the vinyl window handles chipped and broken. There isn’t much of a way to replace the molded handles by themselves. Windows are expensive to replace.

4) Glue Residues - Lease is very specific for no double-side tape or adhesive (ie 3M pull tabs ok, but not double sided tape.) Tons of double sided tape used which results in a fair amount of extra effort to restore (most cases paint comes right off the wall requiring patching sanding etc, some cases Good-off was effective. Lease has double sided tape specifically cited that includes a charge for each instance. Tenant clearly accepted these responsibilities. 

Here is  the biggest question -

I expect withholding  $1.00 of the security deposit is going to cause friction. Withholding the entire amount of the security deposit doesn’t even cover the costs incurred. 

If this goes to court, it is with a judge well known for being pro-tenant.

Fridge - I could purchase the new door and deduct. Seems a bit of a waste. Judge may also decide to prorate or chop that amount down, or throw it into the bucket of normal wear. Would it be safe to purchase a new fridge, deduct maybe 1/2 of cost to replace  current fridge door from the security deposit, provide receipt with explanation?

Windows - same question as above? Would I deduct the cost to replace each damaged window in its entirety, or provide receipt and take a smaller amount off as it isn’t as off the window glass was cracked or shattered? 

WINDOW TREATMENTS - same as above. If I switch from blinds to rods, would I a) provide receipts for the rods and deduct in full - receipt furnished to tenant,  2) deduct cost of blinds as priced today but receipt would be for curtain rods, 3) deduct cost of blinds as outlined in the lease but provide receipt for curtain rods (explanation and receipt furnished) 4)  be forced to replace using the same blinds that were installed when tenant arrived n order to deduct. 

DOUNLE SIDED TAPE - Lease clearly has amount spelled out for each occurrence. Is that safe to deduct when tenant signed? We do the work ourselves so there wouldn’t be a separate charge 

—-

Sorry this in ranking a bit. We had a walkthrough which I always offer for obvious damages (ie holes in the wall.). Window handles broken were called out during that walk through. Walkthroughs are never detailed enough to be final (ie often tenants have lower disconnected and discover broken appliances later.) Fridge

Was discovered after tenant raced away from walkthrough. Discovered shower head busted. Window treatments were so obviously missing, broken and such that it want called out during walk through.  Tenant took photos and videos but nothing detailed - a single shot or two of a room from the entrance, so is saying fridge was fine, normal wear etc 

Next - If we are being nice and deducting ‘portions’ of the charges and tenant continues to grind away, or this goes to court, do the compromise and smaller amounts offered negate the full amounts that could have been charged.  - like we ar nice, deduct portions instead of full amount..this goes to court and judge rules in our favor and that means the smaller amounts we offered being nice. If this goes to court we would expect the full costs deducted. 

Long winded set of related questions. Thanks for sticking though it and sharing input 

Quote from @Kevin Merck:

The guy was not wrong about the lower rate. He didn't say it the best way, but he meant that the income is not subject to self-employment tax.

Still remain strongly interested. 

Presume companies and bank accounts would be up and running….next steps:

• Each unit makes monthly payment to mngt company. 
• Establish solo Roth 401k
• Make quarterly estimated tax payments (?)
• Fund 401k

?