All Forum Posts by: Rhonda Wilson

We are paying about 1.3% of assessed value for property tax in both Tacoma and Ellensburg. In Oregon the rate was about 1%.  That's about $3000 more tax on a $1M property. In Oregon, there is a ~9% income tax, however, if one is highly leveraged, depreciation might drive the income tax to near zero. For that reason, I would say that the tax burden is higher in Washington.

One more thing I didn't think about when moving our investment footprint from Oregon to Washington was the cost of sales tax. It doesn't affect rent, but as we pay for repairs and renovations, that 10% really adds up. 

We have done three 1031 exchanges over the course of 12 years. The first was a SFH into a 4-plex. The next was that same 4-plex into a 14-unit. We recently did another 1031 exchange from a 7-unit to a 14-unit. All of them were successful and I can't think of any regrets.

One of the most challenging things about a 1031 is the timeline restrictions - especially the 45 day identification period. It's a stressful time and you can definitely feel pressure to accept any deal that is reasonable instead of holding out for something ideal. One "trick" we've learned is that we write in the right to delay closing on the relinquished property. What we'll do is extend that closing until we are confident that we have found a property that we can purchase.  In our 2nd 1031, we delayed a few weeks. In the 3rd 1031 we didn't have to delay at all, but our PSA allowed us up to three one-month delays. Our realtor (who only does investment property) says that this is common because so many people do 1031 exchanges that buyers and sellers are understanding of these sorts of provisions. It's very different compared to the SNF market. 

The end result of our 1031 exchanges is an increase in scale which has led to  higher cash flow down-the-road. For about a year after the exchange, we generally see a net decrease in cash flow. However, once the property is stabilized and we start realizing rent increases, we net significantly more cash flow. After all, fourteen rent increases of $50 each is a lot more than four rent increases of $50 each. 

@Calus Glispie If you're not taking the property off the market, perhaps you want to do an LOI (letter of intent) rather than a PSA (purchase and sale agreement). The LOI is non-binding so the seller can look for better offers. I happen to like PSAs because I don't want to invest a lot of time and money in appraisals, etc. and then have the seller accept someone else's offer.

I don't think it's disrespectful to offer a small amount of EM. I just think that offering more EM makes your offer stronger. Suppose a seller receives one offer for $200,000 with $2000 EM; another offer comes in at $205,000 with $20 EM. The higher EM strengthens the 2nd offer possibly even compensating for the lower actual price.

We just completed our third 1031 exchange. In the latest exchange we paid $950 for the intermediary fee. There was no need for a special lawyer as the process is pretty standard. If your capital gains tax is going to be more than a few thousand dollars, I highly recommend a 1031 exchange. The biggest downside of a 1031 is the limited time that you have to identify a replacement property. That 45 days is very short and you may find that you have to buy something that might not have been your first choice.

You have to understand that for a seller someone walking away from a deal is a big setback. They have to start over with advertising, showing, etc. I would absolutely reject a buyer offering $1 in EM. The $1000 suggested by the seller is very reasonable. 

Eviction is a difficult and expensive process. By the time I get to the point of evicting, it's a huge relief to have it done and the problem tenant out of my hair forever! No, I've never regretted.

@Sam Grooms Thank you for sharing some of high-level details from the IREM report. I agree that it would be unfair to IREM to share substantial details of what it included in their report. 

How do you inform people about offerings? We are still doing our own deals, but we're not as young as we used to be. We've thought a lot about our "exit" strategy, meaning that we would like to move more towards passive investing. Do you keep a mailing list of contacts? 

Am I correct in assuming that your deals are not structured for 1031 exchanges? 

@Ben Leybovich You wrote "Jay, statistically it costs on the average about $1,000 per door per annum less to run multifamily in the South-West than Mid-West."

I'm really intrigued by this. Do you happen to have a study or reference? I'm not doubting it. Up in the Washington and Oregon I get really tired of dealing with mold in apartments. It's difficult to prevent and expensive to fix. It also seems that roofs will last longer in a dry climate. 

We are thinking of investing with the southwest next go around and would love to know that our costs will go down on these line items.

Congratulations! I love the look of it both in terms of the open courtyard and swimming pool. Also the apartment you show looks like it's open concept which is fantastic. 

@Joe P. That is what I'm thinking too. The discussion is getting nowhere. I gave up on it.